AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 2002 REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
------------------------------
FORM S-3REGISTRATION STATEMENTUNDER THE SECURITIES ACT OF 1933
------------------------
A/P I DEPOSIT CORPORATION
(Exact name of registrant as specified in its charter)
[Enlarge/Download Table]
DELAWARE6719 11-3612578
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
------------------------------
400 WEST MAIN STREETSUITE 338 BABYLON, NY11702
(631) 587-4700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
ANDREW STIDD400 WEST MAIN STREETSUITE 338 BABYLON, NY11702
(631) 587-4700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:ROBERT A. ZUCCARO, ESQ. LATHAM & WATKINS885 THIRD AVENUENEW YORK, NEW YORK10022
(212) 906-1295
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
[Enlarge/Download Table]
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE(1)
Amtrak/Pennsylvania Station Lease Finance
Trust-2001 Lease-Backed Commercial
Mortgage Pass-Through Certificates,
Series 2001............................. $300,000,000 100% $300,000,000 $71,700
(1) The registration fee has been calculated pursuant to Rule 457(a) under the
Securities Act of 1933. The Proposed Maximum Aggregate Offering Price is
estimated solely for the purpose of calculating the registration fee.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE ORDATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
P-->

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
P-->

PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED , 2002.
$300,000,000
AMTRAK/PENNSYLVANIA STATION LEASE FINANCE TRUST-2001AS ISSUER A/P I DEPOSIT CORPORATION,AS DEPOSITORLEASE-BACKED COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2001
This prospectus relates to the offering for sale by the holders named in
this prospectus of Lease-Backed Commercial Mortgage Pass-Through Certificates,
Series 2001, issued by Amtrak/Pennsylvania Station Lease Finance Trust-2001. The
certificates are being offered by the selling holders. We, the depositor, will
not receive any of the proceeds of this offering. The $300,000,000 in aggregate
principal amount of certificates outstanding, in the aggregate, evidence the
entire beneficial ownership interest of a trust. The assets of the trust consist
primarily of a single, fixed-rate, semi-annual-pay, nonrecourse mortgage loan
which we made on June 20, 2001, to Penn Station Leasing, LLC. The mortgage loan
is secured by a first mortgage lien on Penn Station Leasing's leasehold interest
in a portion of the improvements commonly known as Penn Station, located in the
City and State of New York. Penn Station is owned by the National Railroad
Passenger Corporation, commonly known as Amtrak.
Characteristics of the certificates include:
[Enlarge/Download Table]
INITIAL PRINCIPAL RATINGS OF THE ASSUMED FINAL
AMOUNT OF CERTIFICATES MORTGAGE LOAN DISTRIBUTION DATE
CLASS OF CERTIFICATES THE CERTIFICATES (MOODY'S/S&P) INTEREST RATE OF CERTIFICATES
Class A $300,000,000 A3/BBB 9.25% June 15, 2017THE CERTIFICATES ARE NOT OBLIGATIONS OF OR INSURED OR GUARANTEED BY THE UNITED STATES OR ANY GOVERNMENTAL AGENCY. THE CERTIFICATES ARE NOT OBLIGATIONS OF US, THE TRUSTEE, PENN STATION LEASING OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR THE MORTGAGE LOAN IS INSURED OR GUARANTEED BY US, THE TRUSTEE OR ANY OTHER PERSON. THE CERTIFICATES ARE PAYABLE SOLELY FROM PROCEEDS OF THE ASSETS OF THE TRUST. YOU SHOULD MAKE AN INVESTMENT DECISION BASED UPON AN ANALYSIS OF THE SUFFICIENCY OF THE ASSETS OF THE TRUST.
Distributions to the certificateholders will be made, to the extent funds
are available, on the 15th day of each June and December until maturity, unless
earlier repaid.
The yield to maturity of the certificates will depend on the rate and timing
of payments and other collections of principal on the mortgage loan, including
any involuntary prepayments or any liquidation of the mortgaged property
following a default.
No public market currently exists for the certificates. We do not intend to
list the certificates on any securities exchange and, therefore, no active
public market is anticipated.
------------------------
INVESTING IN THE CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNINGON PAGE 5 FOR IMPORTANT FACTORS TO BE CONSIDERED IN PURCHASING THE CERTIFICATES.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE CERTIFICATES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is .
P-->

IMPORTANT INFORMATION ABOUT THIS PROSPECTUS;AVAILABLE INFORMATION
We have filed a Registration Statement on Form S-3 to register with the
Securities and Exchange Commission the certificates being offered. This
prospectus is part of that Registration Statement. As allowed by the
Commission's rules, this prospectus does not contain all of the information you
can find in the Registration Statement or the exhibits to the Registration
Statement. Before the effectiveness of our Registration Statement, we were not
required to file any information with the Commission. Following the
effectiveness of the Registration Statement, we will file quarterly reports and
other information with the Commission so long as we are required to do so under
the securities laws. You may read and copy any reports, statements and other
information we file at the Commission's public reference rooms in Washington,
D.C., New York, New York, and Chicago, Illinois. Please call 1-800-SEC-0330 for
further information on the public reference rooms. Our filings will also be
available to the public from commercial document retrieval services and at the
web site maintained by the Commission at http://www.sec.gov.
The obligations of the parties to the transactions contemplated in this
prospectus are set forth in documents described in this prospectus, and all of
the statements and information contained in this prospectus are qualified in
their entirety by reference to those documents. This prospectus contains
summaries, which we believe to be accurate, of those documents, but for a
complete description of the rights and obligations summarized in this
prospectus, we refer you to the actual documents, which are available as
exhibits to our registration statement on Form S-3. Copies of the documents may
also be obtained from us.
We have not authorized anyone to give you any information or to make any
representations about the transactions we discuss in this prospectus other than
those contained in this prospectus. If you are given any other information or
representations about these matters, you must not rely on that information. This
prospectus is not an offer to sell or a solicitation of an offer to buy
securities anywhere or to anyone where or to whom we are not permitted to offer
or sell securities under applicable law. The information contained in this
prospectus is current only as of the date on the cover page and may change after
that date. The delivery of this prospectus does not, under any circumstances,
mean that there has not been a change in our affairs since the date on the cover
page or that the information in this prospectus is correct after that date.
As used in this prospectus, AMTRAK is a registered service mark of the
National Railroad Passenger Corporation. ACELA is a registered service mark of
the National Railroad Passenger Corporation.
STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
If and when included in this prospectus or in documents incorporated in this
prospectus by reference, the words "expects,""intends,""anticipates,""estimates" and analogous expressions are intended to identify forward-looking
statements. Any forward-looking statements, which may include statements
contained in "Risk Factors," inherently are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those
projected. Those risks and uncertainties include, among others, general economic
and business conditions, competition, changes in political, social and economic
conditions, regulatory initiatives and compliance with governmental regulations,
and various other events, conditions and circumstances, many of which are beyond
our control, and the control of the trustee or the borrower. These
forward-looking statements speak only as of the date of this prospectus. We
expressly disclaim any obligation or undertaking to release, publicly or
otherwise, any updates or revisions to any forward-looking statement contained
in this prospectus to reflect any change in our expectations with regard to any
forward-looking statement contained in this prospectus or any change in events,
conditions or circumstances on which any forward-looking statement is based.
iii
P-->

SUMMARYTHE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. SEE "RISK FACTORS" FOR IMPORTANT FACTORS TO BE CONSIDERED IN PURCHASING THE CERTIFICATES. IN THIS PROSPECTUS, REFERENCES TO "US,""OUR,""WE" OR THE "DEPOSITOR" REFER TO A/P I DEPOSIT CORPORATION. WHAT YOU WILL OWN
[Enlarge/Download Table]
GENERAL........................... The $300,000,000 in aggregate principal amount of
certificates outstanding, in the aggregate, evidence the
entire beneficial ownership of the issuer, which is a
trust. The issuer was formed, and the certificates were
originally issued, pursuant to a Trust Agreement, dated
as of June 1, 2001, between us and the trustee.
TITLE OF SECURITIES............... A/P I Deposit Corporation Lease-Backed Commercial
Mortgage Pass-Through Certificates, Series 2001.
TRUST FUND........................ The assets of the issuer consist primarily of a single,
fixed-rate, semi-annual-pay, nonrecourse mortgage loan
we made to the borrower on June 20, 2001. On June 20,2001, the mortgage loan had an unpaid principal balance
of $300,000,000.
RELEVANT PARTIES
[Enlarge/Download Table]
ISSUER............................ Amtrak/Pennsylvania Station Lease Finance Trust-2001, a
New York common law trust.
DEPOSITOR......................... A/P I Deposit Corporation, a Delaware corporation. See
"Relevant Parties--The Depositor." Our principal office
is located at 400 West Main St., Suite 338, Babylon, NewYork11702. Our telephone number is (631) 587-4700.
TRUSTEE........................... Wells Fargo Bank Northwest, N.A., a national banking
association organized under the laws of the United
States. The trustee is responsible for the
administration of the mortgage loan. See "Description ofthe Trust Agreement--The Trustee."BORROWER.......................... Penn Station Leasing, LLC, a Delaware limited liability
company. The borrower is a special-purpose entity whose
business is limited to holding the mortgaged property.
See "Risk Factors--The Mortgage Loan" and "RelevantParties--The Borrower." Amtrak is the sole member of the
borrower.
AMTRAK............................ The National Railroad Passenger Corporation, commonly
known as Amtrak, is an operating railroad with a
principal business of providing passenger rail service
in the major intercity travel markets of the United
States. Amtrak also provides mail and express delivery
service. In addition to those core businesses, Amtrak
manages three other businesses: (a) contract management
of commuter railroad operations, (b) project work for
rail agencies and state departments of transportation,
and (c) commercial activities and ventures, including
retail, real estate, telecommunications and consulting
P-->

[Download Table]
activities. Amtrak is operated and managed as a private
corporation and is incorporated under the laws of the
District of Columbia. Amtrak is the owner of Penn
Station, and is the lessor under the prime lease and the
sublessee under the facility sublease, each as described
in this prospectus. See "Relevant Parties--Amtrak."THE CERTIFICATES
[Enlarge/Download Table]
DISTRIBUTIONS ON THECERTIFICATES.................... The certificateholders are entitled to receive
distributions of all cash flow on the mortgage loan and
any other assets in the trust fund, whether as interest,
principal or otherwise, other than amounts payable or
reimbursable to any other person pursuant to the Trust
Agreement. These other amounts include:
(a) reimbursements and indemnification payments to the
trustee and related persons described under "Descriptionof the Trust Agreement--The Trustee" and
"--Indemnification;" (b) reimbursements and
indemnifications payable to us and persons related to
us; (c) any federal, state or local taxes imposed on the
trust fund; and (d) any other costs, expenses and
liabilities that are required to be borne by the issuer
or paid from the trust fund in accordance with
applicable law or the terms of the Trust Agreement.
DISTRIBUTION DATE................. The 15th day of each June and December until maturity,
unless earlier repaid.
RECORD DATE....................... With respect to any distribution date, the close of
business on the immediately preceding business day.
DENOMINATIONS..................... Certificates will be issued in minimum denominations of
$100,000 and in any denomination of $1,000 in excess of
$100,000. See "Description of theCertificates--Delivery, Form, Transfer andExchange--Denominations."CERTIFICATE REDEMPTION............ The certificates are subject to mandatory redemption in
whole or in part at par in the event of a principal
prepayment of the mortgage loan. If the principal
payment by the borrower that results in the redemption
of certificates is voluntary, then a make-whole premium
will be distributed to the certificateholders.
INFORMATION ABOUT THE MORTGAGE LOAN
[Enlarge/Download Table]
THE MORTGAGE LOAN................. The mortgage loan was made in the amount of $300,000,000
on June 20, 2001, pursuant to a Loan and Security
Agreement between us and the borrower. The mortgage loan
is evidenced by a promissory note and secured by a
leasehold mortgage creating a first priority mortgage
lien on the mortgaged property, an assignment of the
facility sublease, as described below, and an assignment
of insurance proceeds and condemnation proceeds. The
mortgage loan is a nonrecourse obligation of the
borrower except for specified circumstances
2
P-->

[Enlarge/Download Table]
including fraud and the intentional misapplication or
misappropriation of rent. See "Description of theMortgage Loan."
MATURITY.......................... June 14, 2017.
LIMITED GUARANTEE................. Amtrak guarantees repayment of any losses incurred by us
on account of fraud, intentional misrepresentation or
misappropriation of funds by the borrower, any member of
the borrower or their agents. The mortgage loan does not
represent any obligation of, and is not insured or
guaranteed by, us, the trustee or any governmental
entity or instrumentality. See "Description of theMortgage Loan--General."
INTEREST.......................... Interest, which accrues at a yearly rate of 9.25%, and
principal due under the mortgage loan is payable on the
14th day of each June and December until maturity.
AMORTIZATION...................... The amount of amortized principal payable for each
six-month period from proceeds of the mortgage loan that
is distributable to certificateholders is outlined on a
schedule attached to this prospectus as Exhibit A.
THE MORTGAGED PROPERTY............ The mortgage loan is secured by, among other things, a
first mortgage lien on the borrower's leasehold estate
in a portion of the improvements commonly known as "Penn
Station" located in the City and State of New York. Penn
Station is owned by Amtrak.
THE PRIME LEASE................... Amtrak has leased the mortgaged property to the borrower
for a term of approximately thirty-one years beginning
on June 20, 2001 in exchange for a single payment of
rent on the date of commencement. The prime lease was
made subject to the existing retail space leases and
other agreements already in existence. In the event of a
default under the prime lease, Amtrak has covenanted not
to board or unboard passengers or cargo at the platforms
under Penn Station or the Farley Building. See
"Description of the Prime Lease."
THE FACILITY SUBLEASE............. The borrower as tenant under the prime lease has entered
into a facility sublease with Amtrak for the use and
occupancy of the portion of Penn Station leased to the
borrower under the prime lease for a term of 16 years
commencing on June 20, 2001. The facility sublease may
be terminated by Amtrak as subtenant due to a material
casualty or condemnation, or renewed by Amtrak as
subtenant for three terms of five years each upon
stipulated terms and conditions. The facility sublease
was made subject to the existing retail space leases and
other agreements already in existence. In the event of a
default under the facility sublease, Amtrak has
covenanted not to board or unboard passengers or cargo
at the platforms under Penn Station or the Farley
Building.
3
P-->

[Enlarge/Download Table]
PREPAYMENT........................ The borrower may prepay the mortgage loan in whole or in
part, in an amount equal to or greater than
$50 million, on any semi-annual payment date after
May 31, 2006. In the event of any prepayment, except in
connection with a casualty or condemnation or in
connection with interest payments in excess of the
amount permitted by law, the borrower is required to pay
a make-whole premium equal to the excess of (a) the
discounted value of the remaining scheduled payments on
the mortgage loan, or the principal amount of the
portion of the mortgage loan being prepaid, which
discounted value will be calculated based on United
States Treasury securities with the related maturity of
the remaining scheduled payments plus 0.50% over
(b) the principal amount of the mortgage loan, or the
principal amount of the portion of the mortgage loan
being prepaid.
4
P-->

RISK FACTORS YOU SHOULD CONSIDER, AMONG OTHER THINGS, FACTORS DESCRIBED IN "LEGAL ASPECTSOF MORTGAGE LOANS" AS WELL AS THE FOLLOWING FACTORS IN CONNECTION WITH THE PURCHASE OF THE CERTIFICATES. THE FOLLOWING DISCUSSION IS NOT INTENDED TO INCLUDE ALL FACTORS THAT YOU MAY CONSIDER RELEVANT. YOU SHOULD MAKE YOUR OWN INDEPENDENT EVALUATION OF ALL FACTORS THAT YOU DEEM RELEVANT TO AN INVESTMENT IN
THE CERTIFICATES. RISKS RELATING TO THE CERTIFICATES YOUR INVESTMENT IS NOT INSURED OR GUARANTEED AND YOUR SOURCE OF PAYMENTS IS
LIMITED TO PAYMENTS UNDER THE MORTGAGE LOAN. The certificates represent
beneficial ownership interests solely in the assets of the trust fund and do not
represent an interest in, or obligation of, us or any other person. The primary
asset of the trust fund and sole source of payments on the certificates is the
mortgage loan, and the primary security and source of payment for the mortgage
loan is the mortgaged property and the other collateral described in this
prospectus. There can be no assurance that the cash flow from the mortgaged
property and the proceeds of any sale or refinancing of the mortgaged property
will be sufficient to pay the principal of, and interest on, the mortgage loan
or retire the certificates with any accrued and unpaid interest. In the event of
a default under the mortgage loan, your only recourse would be against the
mortgaged property and other assets that have been pledged by the borrower to
secure the mortgage loan. The mortgage loan is not insured or guaranteed by any
governmental entity, us or any private mortgage insurer. See "Description of theMortgage Loan--General."LIMITED LIQUIDITY AND MARKET VALUE MAY ADVERSELY AFFECT PAYMENTS ON YOUR
CERTIFICATES. The certificates have no established trading market and will not
be listed on any securities exchange. The liquidity of the trading market in the
certificates, and the market price quoted for the certificates, may be adversely
affected by changes in the overall capital markets and by changes in Amtrak's
financial performance. You cannot be sure that an active trading market will
develop for the certificates.
THE YIELD AND MATURITY OF THE CERTIFICATES WILL BE SENSITIVE TO FLUCTUATIONS
THAT MAY ADVERSELY AFFECT YOUR RETURN. The yield to maturity of the
certificates will be sensitive to, among other things, the rate and timing of
principal payments, including as a result of involuntary prepayment, default and
liquidation, on the mortgage loan. We make no representation as to the
anticipated rate of principal payments, including as a result of involuntary
prepayment, default and liquidation, on the mortgage loan or as to the
anticipated yield to maturity on any certificate. The mortgage loan may be
prepaid, in whole or in part, in an amount equal to or greater than
$50 million, at any time after May 31, 2006. Prepayments may, in some
circumstances, result from a casualty on, or condemnation of, the mortgaged
property. See "Description of the Mortgage Loan--Prepayment; Yield Maintenance"
and "Description of the Certificates--Yield and Maturity Considerations."
If you purchase a certificate at a premium and distributions on the
certificate occur at a rate faster than anticipated at the time of purchase,
your actual yield to maturity may be lower than that assumed at the time of
purchase. Similarly, if you purchase a certificate at a discount and
distributions on the certificate occur at a rate slower than that assumed at the
time of purchase, your actual yield to maturity may be lower than assumed at the
time of purchase.
The aggregate amount of distributions on the certificates, the yield to
maturity of the certificates, the rate of payments on the certificates and the
weighted average life of the certificates will be affected by the timing of any
delinquency or default, and by the timing and magnitude of any loss, on the
mortgage loan. In general, the earlier a loss is borne by an investor, the
greater is the effect on that investor's yield to maturity. You should make your
own assessment of the rate and timing of principal prepayments on the mortgage
loan and the anticipated yield to maturity on your certificates.
Regardless of whether losses ultimately result, a delinquency or a default
on the mortgage loan may significantly delay the receipt of payments by a holder
of a certificate.
5
P-->

PREPAYMENTS MAY REDUCE THE YIELD ON YOUR CERTIFICATES. Payments on the
mortgage loan will affect distributions on, and the weighted average lives of,
the certificates. Prepayments on the mortgage loan, including involuntary
prepayments and unscheduled payments resulting from default, will tend to
shorten the weighted average lives of the certificates. The borrower is entitled
to prepay the mortgage loan in whole or in part, in an amount equal to or
greater than $50 million, on any payment date after May 31, 2006. See
"Description of the Mortgage Loan--Prepayment; Yield Maintenance."
Any changes in weighted average life may adversely affect the yield to
certificateholders. Prepayments resulting in a shortening of the weighted
average life of a certificate may be made at a time of low interest rates when a
certificateholder may be unable to reinvest the resulting payments on its
certificates at a comparable yield. Delays and extensions resulting in a
lengthening of the weighted average life of a certificate may occur at a time of
high interest rates when a certificateholder may have been able to reinvest
distributions that would otherwise have been received by it at higher yields.
YOU BEAR THE RISK OF BORROWER DEFAULTS. The aggregate amount of
distributions on the certificates and the yield on the certificates will be
affected by the rate and the timing of any delinquencies and defaults on the
mortgage loan. The mortgage loan is a nonrecourse obligation of the borrower and
is not insured or guaranteed by any governmental entity, by any private mortgage
or other insurer, or by us, the trustee or any other person. Amtrak is only
guaranteeing repayment of losses incurred by us on account of fraud, intentional
misrepresentation or misappropriation of funds by the borrower, any member of
the borrower or their agents.
The ability of the borrower to make payments on the mortgage loan prior to
maturity is dependent primarily on the lease payments payable by Amtrak under
the facility sublease, and at maturity, whether scheduled or upon acceleration,
upon the final payment on the facility sublease or the proceeds of a sale or
refinancing of the mortgaged property which, in turn, will be dependent on,
among other things, the value and successful operation of Penn Station. See
"Description of the Mortgage Loan."
The mortgage loan does not have any significant payment history, and there
can be no assurance that required payments will be made or, if made, will be
made on a timely basis. If a purchaser of a certificate calculates its
anticipated yield based on an assumed rate of default and amount of losses on
the mortgage loan that is lower than the actual default rate and amount of
losses, that purchaser's actual yield to maturity will be lower than calculated
and could, in some cases, be negative. The timing of any loss upon liquidation
of the mortgage loan will also affect the actual yield to maturity on the
certificates, even if the rate of default and severity of loss are consistent
with an investor's expectations. In general, the earlier a loss borne by an
investor occurs, the greater the effect on the investor's yield to maturity.
ALL OF OUR CAPITAL STOCK IS OWNED BY A SINGLE SHAREHOLDER, AND THE INTERESTS
OF OUR SHAREHOLDER MAY NOT BE ALIGNED WITH YOURS. GSS Holdings, Inc. is our
sole shareholder and has the power to control our affairs and policies. They
also control the election of our directors and the appointment of our
management. The interests of GSS Holdings, Inc. could conflict with your
interests.
RISKS RELATING TO CREDIT LEASES AND THE MORTGAGED PROPERTY AMTRAK'S CREDIT RATING DOES NOT GUARANTEE TIMELY PAYMENT ON THE
CERTIFICATES. Credit lease loans are loans that are secured by the net lease
obligations of a credit-rated tenant or guarantor. In reliance on the credit
ratings of a tenant or guarantor, a credit lease loan is generally underwritten
to lower debt service coverage ratios and/or higher loan-to-value ratios than
would have been acceptable had a property been leased to less creditworthy
tenants. In the event that a tenant defaults in its obligations under a credit
lease, the related property may not be relet for sufficiently high rent to make
scheduled payments on the credit lease loan, and funds received in a liquidation
of the property may not be sufficient to make scheduled payments under the
credit lease loan.
6
P-->

The mortgage loan is primarily secured by an assignment of the triple net
lease obligations of Amtrak under the facility sublease. Interest and principal
payments on the mortgage loan will be dependent principally on the payment by
Amtrak of rent and other payments due under the facility sublease. If Amtrak
defaults on its obligation to make lease payments under the facility sublease,
the borrower generally will not have the ability to make the required payments
on the mortgage loan. Additionally, if Amtrak or the borrower were to default on
its obligations under the facility sublease or the mortgage loan, respectively,
it is unlikely that the proceeds of a foreclosure of the mortgaged property
would be sufficient to pay the amount owing on the mortgage loan due to the
unique use of the mortgaged property and its limited value for other tenants.
The long-term debt rating of Amtrak, as of January 11, 2002, is "A3" by
Moody's Investors Service, Inc. and "BBB" by Standard & Poor's. Moody's has
placed Amtrak on its watch list with "direction uncertain" and S&P has placed
Amtrak on credit watch with "developing implications".
THE ABSENCE OF OR INADEQUACY OF INSURANCE COVERAGE ON THE PROPERTY MAY
ADVERSELY AFFECT PAYMENTS ON YOUR CERTIFICATES. The mortgaged property may
suffer casualty losses due to risks that are not covered by insurance or for
which insurance coverage is not adequate or available at commercially reasonable
rates. Moreover, if reconstruction or major repairs are required following a
casualty, changes in laws that have occurred since the time of original
construction may materially impair Amtrak's ability to effect such
reconstruction or major repairs or may materially increase the cost of those
repairs or reconstruction.
In light of the recent terrorist attacks in New York City, the Washington,
D.C. area and Pennsylvania, insurance coverage for acts of terrorism is no
longer available in sufficient amounts to cover the mortgaged property.
Furthermore, the limited amounts of terrorism insurance available in the market
are being offered at much higher prices as compared to prices before the
terrorist attacks. Therefore, insurance coverage on the mortgaged property may
be insufficient to cover potential losses. If casualty losses are not covered by
insurance then, in the event of a casualty, the amount available to make
distributions on your certificates could be reduced.
RISKS RELATING TO THE MORTGAGE LOAN
LIMITED ASSETS ARE AVAILABLE FOR PAYMENT OF THE MORTGAGE NOTE. The borrower
is a special purpose entity whose only asset is the mortgaged property. The
mortgaged property consists of the borrower's leasehold estate in a portion of
Penn Station. The borrower does not own Penn Station itself. Payments on the
mortgage note are expected to be made entirely from the payments of rent under
the facility sublease entered into between the borrower and Amtrak. The borrower
will not have, and should not be expected in the future to have, any significant
assets available for payments on the mortgage note other than the mortgaged
property.
Only a small portion of the revenue from the mortgaged property is generated
from rental payments from the retail tenants under agreements existing at the
inception of the mortgage loan, and the rental payments alone are insufficient
to make the rental payments due under the facility sublease. The remainder of
the rent owed by Amtrak under the facility sublease is expected to be provided
by Amtrak from its other sources of revenue. The borrower's ability to make
payments in respect of the mortgage loan depends upon its receipt of payments
from the mortgaged property and, ultimately, Amtrak's successful railroad
operation. Many of the factors affecting the amount of revenues are beyond the
control of the borrower and Amtrak, such as the general levels of passenger
volume and the national and regional economies. Fluctuations may adversely
affect the amount and timing of payments on the mortgage loan and, consequently,
adversely affect the amount and timing of distributions on the certificates.
THE MORTGAGE LOAN IS SECURED BY THE MORTGAGED PROPERTY, WHICH HAS UNCERTAIN
VALUE. The mortgage loan is secured by a lien on the borrower's leasehold
estate in a portion of Penn Station. Traditional
7
P-->

lending on the security of commercial real estate is generally viewed as
exposing a lender to a greater risk of loss than lending on the security of one
to four-family residential property because commercial real property lending
typically involves larger loans to a single obligor than does residential one to
four-family lending. Further, the repayment of loans secured by income-producing
properties is typically dependent upon the successful operation of the related
real estate project. If the cash flow from the project is reduced, the
borrower's ability to repay the loan may be impaired.
The mortgage loan is secured by the mortgaged property but is not primarily
dependent upon its value in the traditional sense. Consequently, traditional
measures of value such as loan-to-value ratios and debt service coverage ratios
have not been a factor in determining the amount of the mortgage loan as it
would be in a traditional asset-based financing. No appraisal was obtained with
respect to the mortgaged property in connection with the origination of the
mortgage loan and therefore, there is no assurance from any third party of the
current value of Penn Station or the mortgaged property itself. Additionally,
due to the unique use of Penn Station, we and Amtrak believe that the value of
the mortgaged property for third parties most likely would be less than the
original principal amount of the mortgage loan. Penn Station's importance to
Amtrak is not solely as an income-producing property, but rather, as a critical
element of its operations infrastructure, and its continued operation is vital
as a hub in its important Northeast Corridor.
The Farley Building, which is located across 8th Avenue from Penn Station,
has been the subject of various development proposals and discussions as a
railroad station. Any development of the Farley Building is subject to various
contingencies, including the financing of that development. Amtrak does not
believe that the various development proposals and discussions will result in a
material adverse effect on distributions on the certificates.
THE CERTIFICATES ARE HIGHLY DEPENDENT ON EVENTS AFFECTING THE BORROWER AND
THE MORTGAGED PROPERTY. The certificates represent beneficial interests in a
single mortgage loan made to a single borrower secured by a single mortgaged
property, which is a leasehold interest in a portion of a railroad station. This
concentration creates a greater risk that an adverse event relating to the
borrower or the mortgaged property will adversely affect the certificates than
would be the case if the certificates represented interests in multiple mortgage
loans to multiple borrowers or the mortgage loan were secured by multiple
properties of varying property types.
THE BORROWER MAY ENGAGE IN OTHER FINANCING, THEREBY INCREASING ITS LIQUIDITY
NEEDS. The mortgage loan documents permit the borrower to incur unsecured trade
payables not evidenced by a note and arising out of purchases of goods and
services in the ordinary course of business, provided that the conditions
specified in the Loan and Security Agreement between us and the borrower
evidencing the mortgage loan are satisfied. These new obligations could reduce
the likelihood of timely payment of obligations on the certificates.
THERE ARE VARIOUS BANKRUPTCY AND INSOLVENCY LIMITATIONS ON LENDERS THAT MAY
NEGATIVELY AFFECT PAYMENTS ON THE CERTIFICATES. Under the Bankruptcy Code, the
filing of a petition in bankruptcy by or against an obligor will stay the
commencement or continuation of a foreclosure action against the real property
owned by that obligor. The resulting delay may be significant. In addition, a
court that determines the value of a mortgaged property to be less than the
principal balance of the related mortgage loan may, subject to protections
available to the lender, stop a lender from foreclosing on the mortgaged
property and, as a part of a restructuring plan, reduce the amount of secured
indebtedness to the value of the mortgaged property as it exists at the time of
the proceeding, leaving the lender as a general unsecured creditor for the
difference between that value and the outstanding amount of the mortgage loan. A
bankruptcy court may also grant a debtor a reasonable time to cure a payment
default, reduce semi-annual payments due under a mortgage loan, change the rate
of interest due on a mortgage loan or otherwise modify the mortgage loan's
repayment schedule. For a more complete description of the possible effects of a
bankruptcy filing on the ability of a secured mortgage lender to obtain payment
of its loan and realize upon collateral, see "Legal Aspects of MortgageLoans--Bankruptcy Issues."
8
P-->

INSPECTIONS PERFORMED ON THE MORTGAGED PROPERTY MAY PROVE INACCURATE OR
INCOMPLETE. A licensed engineer inspected the mortgaged property to assess the
structure, exterior walls, roofing, interior construction, mechanical and
electrical systems and general condition of the site, buildings and other
improvements located on the mortgaged property. There can be no assurance that
those inspections would have uncovered all material weaknesses and needs for
maintenance, repair or improvements to the mortgaged property.
EARTHQUAKE, FLOOD AND OTHER INSURANCE MAY NOT BE AVAILABLE OR OBTAINED IN
AMOUNTS SUFFICIENT TO COVER POTENTIAL LOSSES. Although the mortgaged property
is required to be insured against some risks, there is a possibility of casualty
loss on the mortgaged property from risks not covered by insurance or for which
insurance proceeds may not be adequate, including floods or earthquakes. There
can be no assurance that the borrower or Amtrak will comply with requirements to
maintain adequate insurance on the mortgaged property. If reconstruction
following fire or other casualty, or any major repair or improvement is
required, changes in laws and governmental regulations may be applicable and may
materially affect the cost to, or ability of, the borrower or Amtrak to effect
reconstruction, major repair or improvement. As a result of the occurrence of
any of these events, the amount realized with respect to the mortgage loan, and
the amount available to make distributions on the certificates, could be
reduced. There can be no assurance that the amount of earthquake or flood
insurance currently required or provided would be sufficient to cover damages
caused by an earthquake or flood, or that insurance will be available in the
future at commercially reasonable rates. Neither the borrower nor Amtrak is
required to maintain earthquake insurance; however, the current blanket
insurance policy covering the mortgaged property insures the mortgaged property
for damages resulting from an earthquake.
NON-COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT MAY LEAD TO
UNEXPECTED COSTS FOR THE BORROWER OR AMTRAK. Under the Americans with
Disabilities Act of 1990, or "ADA," all public accommodations are required to
meet federal requirements related to access and use by disabled persons. If the
mortgaged property does not comply with the ADA, the borrower, or Amtrak under
the facility sublease, is likely to incur costs of complying with the ADA. In
addition, subsequent amendments to the ADA or related regulations could increase
the borrower's and Amtrak's compliance obligations. Noncompliance could result
in the imposition of fines by the federal government or an award of damages to
private litigants.
FUTURE LITIGATION MAY LEAD TO UNEXPECTED COSTS FOR THE BORROWER OR
AMTRAK. There may be pending or threatened legal proceedings against the
borrower and its affiliates arising out of the ordinary business of the borrower
and its affiliates. There can be no assurance that litigation will not have a
material adverse effect on distributions to certificateholders.
ENVIRONMENTAL LAWS MAY LEAD TO UNEXPECTED COSTS FOR THE BORROWER OR
AMTRAK. Under various federal, state and local environmental laws, a current or
previous owner or operator of real property may be liable for the costs of
investigation, removal or remediation of hazardous or toxic substances on,
under, adjacent to, or in the property. These laws often impose liability
whether or not the owner or operator knew of or was responsible for the presence
of hazardous or toxic substances. The cost of investigation, removal, or
remediation could exceed the value of the property and/or the aggregate assets
of the owner. In addition, the presence of hazardous or toxic substances on,
under, adjacent to, or in real property, or the failure to properly remediate
environmental conditions of the property, may adversely affect the owner's or
operator's ability to sell its property or to refinance using the property as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removal or remediation of
substances at the disposal or treatment facility. Some laws impose liability for
release of asbestos-containing materials, or "ACMs," into the air or require the
removal or containment of ACMs. Third parties may seek recovery from the owners
or operators of real properties for personal injury associated with ACMs or
exposure to other toxic or hazardous substances. For all of these reasons, the
presence of, or potential for contamination by,
9
P-->

hazardous or toxic substances at, on, under, adjacent to, or in Penn Station may
materially adversely affect the value of the mortgaged property and the
borrower's ability to repay the mortgage loan.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
"CERCLA," as well as under some state laws, a secured lender, such as the trust
fund, may be liable, as an owner or operator, for the costs of responding to a
release or threat of a release of hazardous substances on or from a mortgaged
property if, for example, (a) agents or employees of the lender are deemed to
have participated in the management of a borrower, or (b) the lender actually
takes possession of a borrower's property or control of its day-to-day
operations. See "Legal Aspects of Mortgage Loans--Environmental Risks."
Those portions of Penn Station that are subject to the prime lease have been
the subject of Phase I environmental site assessments from time to time, most
recently in April 2001, by ATC Associates, Inc., prepared in connection with the
origination of the mortgage loan. The Phase I was intended to determine any
obvious areas or likely potential sources of environmental concern for
liabilities at the subject property. The Phase I was conducted in accordance
with the scope and limitations of the American Society for Testing Materials
(ASTM) Standard E 1527-OO STANDARD PRACTICE FOR ENVIRONMENTAL SITE ASSESSMENTS:
PHASE I SITE ASSESSMENT PROCESS, and included a visual observation of most of
the subject property during a site visit; a review of public records and
databases concerning known conditions at the subject property or in the vicinity
of the subject property; discussions with Amtrak personnel familiar with the
subject property and environmental compliance; and the preparation of a written
report. The Phase I did not include sampling or analysis of soil, groundwater,
or other environmental media. There can be no assurance that all environmental
conditions and risks relating to the mortgaged property have been identified in
the Phase I, including those relating to the areas reviewed.
The Phase I identified some environmental conditions which have impacted or
might impact the leased premises. These conditions included the possible
presence of PCBs in hydraulic and other equipment; the presence of ACM; and some
issues relating to the storage and management of chemicals and other regulated
substances. In addition, lead-based paint is likely to be present in Penn
Station. Although Amtrak believes that the environmental conditions identified
in the Phase I would not have a material adverse effect on the borrower's
business, assets or results of operations taken as a whole, there can be no
assurance that the mortgaged property will not be adversely affected by the
presence of these or other environmental conditions.
Penn Station has also been the subject of ACM surveys from time to time, the
most recent being an Asbestos Survey Recertification, dated October 1994, by
Hillmann Environmental Co., Inc., and partially updated by Hillmann in
August 1998. The Hillmann ACM Reports included a consideration of the presence
of ACMs in Penn Station, exclusive of areas leased to the Long Island Rail Road.
According to the Hillmann ACM Reports, ACMs remain in areas of Penn Station,
including in fireproofing, floor tiles, and pipe insulation. These ACMs are not
expected to present a significant risk so long as they are properly managed.
Amtrak has a policy of removing ACMs when and as areas are renovated and,
pursuant to this policy, has removed some of the ACMs identified in the Hillmann
ACM Reports. Although Amtrak believes that the presence of ACMs in Penn Station,
so long as they are properly managed, would not have a material adverse effect
on the borrower's business, assets or results of operations taken as a whole,
there can be no assurance that the mortgaged property will not be adversely
affected by the presence of ACMs.
The leased portions of Penn Station are in the vicinity of other
Amtrak-owned property in which environmental conditions, such as areas of
PCB-contaminated track ballast, are present. See "Risk Factors--Risks Relatingto Amtrak--Legal And Regulatory Risks of Amtrak." Penn Station is also in the
vicinity of sites owned by other parties containing leaking underground storage
tanks or other potential sources of groundwater contamination. Although the
borrower might not have legal liability for any contamination in the event that
any off-site sources might impact Penn Station, there are
10
P-->

circumstances under which the borrower could be charged with responsibility for
environmental remediation on its site caused by off-site sources, and the
enforcement of rights against third parties could result in additional costs.
We cannot predict whether modifications or existing laws or regulations, the
adoption of new laws or regulations, or changes in, or the discovery of new,
conditions at or near Penn Station may have a material adverse effect on the
mortgaged property or results of operations thereof in the future.
AMTRAK'S MANAGEMENT OF THE MORTGAGED PROPERTY COULD LEAD TO A REDUCTION IN
ITS VALUE. Penn Station is operated and managed by Amtrak. The effective
management and operation of Penn Station will be a significant factor affecting
the revenues, expenses and value of the mortgaged property. Amtrak will be
responsible for responding to changes in demand and other services and ensuring
that maintenance and capital improvements are carried out in a timely fashion.
There can be no assurance that Amtrak will be able to maintain or increase Penn
Station's value.
DUE-ON-SALE CLAUSES AND OTHER COVENANTS MAY NOT BE ENFORCEABLE. The
mortgage contains a due-on-sale clause, which generally permits the acceleration
of the maturity of the mortgage loan if the borrower sells, transfers or conveys
the mortgaged property or its interest in the mortgaged property, without the
consent of the holder of the mortgage loan. There may be limitations on the
enforceability of these clauses. Additionally, the facility sublease contains a
covenant which provides that if there is an event of a default by Amtrak, then
Amtrak will not board or unboard passengers or cargo at Penn Station or the
Farley Building. There may be limitations on the enforceability of this
provision. See "Legal Aspects of Mortgage Loans--Enforceability of Provisions." CONDEMNATION OF ALL OR PART OF PENN STATION COULD LEAVE THE BORROWER WITHOUT
FUNDS TO MAKE PAYMENTS ON THE CERTIFICATES. Penn Station or a portion of it may
in the future become the subject of condemnation proceedings. If a condemnation
occurs, there cannot be any assurance that the condemnation award would be
sufficient to restore the portion of Penn Station leased to the borrower or to
satisfy the remaining indebtedness of the mortgage loan or that any partial
condemnation would not have a material adverse effect on the continued use of,
or operation of, the portion of Penn Station leased to the borrower.
BANKRUPTCY OF THE BORROWER AND ITS AFFILIATES COULD DELAY OR PROHIBIT
PAYMENTS ON THE CERTIFICATES. The organizational documents of the borrower
limit its purposes to managing, owning, operating and financing the mortgaged
property, require the appointment of an independent trustee or manager and
require the consent of that trustee or manager for any voluntary bankruptcy or
similar proceeding. The purpose of this provision is to limit the effect of any
adverse business circumstances on the ability of the borrower to repay the
mortgage loan and avoid the filing of any bankruptcy petition that is not
justified by the borrower's own economic circumstances. However, there can be no
assurance that the borrower will not become the subject of bankruptcy
proceedings or that the arrangements will otherwise prove to be successful. In
the event that the borrower were to become the subject of bankruptcy
proceedings, a delay or substantial reduction in mortgage loan payments may
occur, and the borrower would probably have insufficient funds to make all
required payments on the mortgage loan. These events also would delay
foreclosure on the mortgaged property, delay payment on the mortgage note and
delay or prohibit the application of amounts in the accounts relating to the
mortgage loan and the certificates to their intended uses until the conclusion
of the bankruptcy proceedings. If the borrower files a bankruptcy petition, the
automatic stay provision of the Bankruptcy Code would apply to the reserve
account of the borrower. See "Description of the Mortgage Loan--General."RISKS RELATING TO AMTRAKRISKS REGARDING THE RESTRUCTURING OR LIQUIDATION OF AMTRAK UNDER SECTION 204 OF THE AMTRAK REFORM ACT THE RECENT FINDING BY THE AMTRAK REFORM COUNCIL THAT AMTRAK WILL NOT BECOMEOPERATIONALLY SELF-SUFFICIENT BY FISCAL YEAR 2003 REQUIRES THE AMTRAK REFORM COUNCIL TO SUBMIT TO CONGRESS A PLAN FOR A
11
P-->

RESTRUCTURED AND RATIONALIZED INTERCITY RAIL PASSENGER SYSTEM BY FEBRUARY 7,2002. IT IS UNCLEAR WHAT, IF ANY, ACTION CONGRESS WILL TAKE SUBSEQUENT TO
RECEIPT OF THE PLAN. The Amtrak Reform and Accountability Act of 1997 requires
Amtrak to achieve operational self-sufficiency by December 2, 2002. The Amtrak
Reform Act also established the Amtrak Reform Council, an independent federal
commission, to evaluate Amtrak's financial performance and make recommendations
to Amtrak for achieving cost and productivity improvements and financial
reforms, as well as to report to Congress on Amtrak's operations.
On November 9, 2001, the Reform Council by a 6-to-5 vote of its members made
a finding pursuant to Section 204(a) of the Amtrak Reform Act that Amtrak will
not be operationally self-sufficient by December 2, 2002. Section 204 of the
Amtrak Reform Act provides that, if the Reform Council makes a finding that
Amtrak will not achieve operational self-sufficiency by Fiscal Year 2003, the
Reform Council is required to report its finding to the President of the United
States and some congressional committees. Under the Amtrak Reform Act, once such
a finding by the Reform Council is made, within 90 days of the finding, (1) the
Reform Council must submit to Congress a plan for a restructured and
rationalized national intercity rail passenger system, and (2) Amtrak must
submit to Congress an action plan for the liquidation of Amtrak after having the
plan first reviewed by the Inspector General of the Department of Transportation
and the General Accounting Office for accuracy and completeness.
On December 20, 2001, Congress passed the Department of Defense
appropriations bill for Fiscal Year 2002 which provided in relevant part that
Amtrak is not to use appropriated funds or self-generated revenues to submit a
plan for its liquidation unless and until an Amtrak reauthorization act has been
enacted. Congress did not change the requirement under the Amtrak Reform Act
that requires the Reform Council to submit a restructuring plan. This plan is
due by February 7, 2002. A meeting of the Reform Council is scheduled for
January 11, 2002 to discuss the merits of various options for such a
restructuring plan. It is uncertain when, if ever, Congress will pass a
reauthorization act, and thus when, if ever, Amtrak may be required to submit a
liquidation plan pursuant to the Amtrak Reform Act. The implementation of a
liquidation plan may lead to actions that would have a material adverse effect
on payments on the certificates. It is also uncertain what action, if any,
Congress may take regarding the restructuring plan to be submitted by the Reform
Council, as Section 205 of the Amtrak Reform Act, which requires the Senate to
take up a liquidation disapproval resolution if Congress does not enact
restructuring legislation, has not changed. However, the implementation of a
restructuring plan might lead to actions that would have a material adverse
effect on payments on the certificates.
A number of the entities that provide oversight on Amtrak's operations had
earlier questioned Amtrak's ability to achieve operational self-sufficiency by
the date mandated by the Amtrak Reform Act. Examples of these questions are
included in the General Accounting Office, or "GAO," report issued May 31, 2000,
entitled, "Intercity Passenger Rail: Amtrak Will Continue to Have Difficulty
Controlling Costs and Meeting Passenger Needs," known as the "GAO Cost Report,"
the GAO's testimony on September 26, 2000 at the Senate Committee on Commerce,
Science, and Transportation's Rail Act Hearing, the GAO report entitled
"Intercity Passenger Rail: Amtrak's Progress in Improving Its Financial
Condition Has Been Mixed" (July 9, 1999), the report of the Office of the
Inspector General of the Department of Transportation, or "DOT IG," entitled
"Report on the 1999 Assessment of Amtrak's Financial Needs Through Fiscal Year
2002" (July 21, 1999), the DOT IG report issued on September 19, 2000, entitled,
"2000 Assessment of Amtrak's Financial Performance and Requirements, known as
the "DOT IG Assessment" and the DOT IG's March 21, 2001 Testimony before the
Subcommittee on Transportation and Related Agencies, Committee on
Appropriations.
The DOT IG Assessment based its estimates in part on its concerns arising
from three elements of Amtrak's Fiscal Year 2000 business plan, including an
assessment by the DOT IG that Amtrak's expenses would increase by $737 million
which the DOT IG attributed to undefined management
12
P-->

actions which Amtrak had assumed would result in expense reductions, a reduction
by the DOT IG in the estimated Northeast Corridor passenger revenue by
$304 million as a result of the DOT IG's projections of ridership, and a
reduction by the DOT IG in the estimated mail and express delivery revenue by
$179 million as a result of the DOT IG's projections of growth of that business.
The DOT IG believed that increases in Amtrak's expenses had inhibited Amtrak's
ability to achieve significant declines in Amtrak's cash losses. Similarly, in
the GAO's testimony at the Rail Act Hearing, the GAO concluded that Amtrak has
had and would continue to have difficulty in controlling increases in its costs.
It is unclear whether any of these statements made by the DOT IG or the GAO will
have any impact on Congress' consideration of any plans that may be submitted to
it by the Reform Council or Amtrak.
In its March 19, 2001 annual report, the Reform Council concluded that
Amtrak's corporate structure should fundamentally be changed, including the
separation of its infrastructure responsibilities, train operations and
government functions. The Reform Council has in the past expressed concerns
about the broad range of functions performed by Amtrak beyond the functions of
operating passenger rail and mail and express delivery services. These other
functions include maintenance of infrastructure and repairing passenger coaches
and locomotives, managing and developing real estate utilized in rail
operations, and acting as a contractor to operate domestic rail commuter service
and foreign passenger services. It is unclear whether an attempt by the Reform
Council to separate these responsibilities will be included in the restructuring
plan submitted to Congress or the restructuring plan, if any, adopted by
Congress.
A restructuring plan submitted by the Reform Council is not required to
protect the interests of Amtrak creditors or other contractual counterparties.
Congress has the power to disapprove any plan submitted under Section 204 of the
Amtrak Reform Act, amend it, enact legislation requiring that an alternative
plan be implemented or ignore the plan. Although Section 205 of the Amtrak
Reform Act provides for expedited consideration by the Senate of the submitted
plan, that provision may be changed unilaterally by the Senate, and it does not
preclude the Senate from rejecting the Reform Council plan and pursuing some
other course of action. Further, there is no comparable provision dealing with
deliberation on the plan by the House of Representatives. A plan submitted by
the Reform Council has no legal or binding effect unless both the House and the
Senate adopt legislation to implement it which is signed by the President. If
Congress chooses to pass legislation on passenger rail service, the impact on
Amtrak's operations or financial condition cannot be reliably predicted, and the
interests of the creditors of Amtrak and other contractual counterparties, and
consequently the certificateholders, could be adversely affected. In addition,
the uncertainty brought about by the Reform Council's finding may have a
negative impact on the willingness of Amtrak's current or potential lenders to
advance funds or offer additional financing to Amtrak. In addition, if Amtrak is
unable to achieve and maintain self-sufficiency in accordance with existing law,
the willingness of lenders to advance funds or offer additional financing to
Amtrak may be negatively impacted.
RISKS REGARDING FUNDING FOR CAPITAL EXPENDITURES AMTRAK'S CHRONIC LACK OF SUFFICIENT CAPITAL HAS LED TO A LARGE BACKLOG OF
CAPITAL INVESTMENT NEEDS. Amtrak has required appropriations from the federal
government since its inception to cover a significant portion of its capital
expenditures, including payment of principal of Amtrak's indebtedness and
capital leases. From 1971 through December 2000, Amtrak received approximately
$11.0 billion from the federal government for capital investment. The Taxpayer
Relief Act of 1997 provided Amtrak with $2.2 billion in funds to be used, along
with interest earnings, for qualified expenditures as defined in the Taxpayer
Relief Act. Qualified expenditures under the Taxpayer Relief Act include
equipment and facility acquisition and improvements, as well as any interest and
debt associated with these purchases. Although funding under the Taxpayer Relief
Act significantly improved Amtrak's ability to achieve some capital investment
goals, it did not solve Amtrak's long-term need for a dedicated capital funding
source.
13
P-->

The Amtrak Reform Act proposed a level of federal appropriation for Amtrak
equal to $5.3 billion from Fiscal Year 1998 through Fiscal Year 2001. However,
federal appropriations for the period, other than Taxpayer Relief Act funds,
have been significantly less than the proposed level, and have totaled
$2.8 billion. Total available funds for capital investment from federal capital
grants and Taxpayer Relief Act funds were $464 million in Fiscal Year 2001,
which is a 37% reduction from the $738 million available in Fiscal Year 2000,
including Taxpayer Relief Act funds. Congress has appropriated $521 million for
Fiscal Year 2002, $97 million of which has been received through continuing
resolutions, with the balance expected by the end of January 2002.
In order for Amtrak to pay for deferred capital expenses in the future,
Amtrak will require a significant amount of capital funding, including funding
from state and local sources. There is no assurance that funding will be made
available to Amtrak, or will be sufficient to fund its capital needs. The impact
on Amtrak's operations if Amtrak continues to defer capital expenditures for
major repairs to, and replacements of, its facilities, railway, tunnels and
equipment cannot be reliably estimated. If in future fiscal years, Amtrak does
not receive an amount of federal capital appropriation required to sustain its
then current capital service needs, Amtrak may be required to consider
restructuring the scope of its business to reduce its capital service needs. If
Amtrak does not or cannot address funding shortfalls, Amtrak's ability to make
payments on the facility sublease could be adversely affected, which would
negatively affect distributions on the certificates.
AMTRAK IS DEPENDENT UPON CONTINUED STATE AND LOCAL SUPPORT FOR ITS CAPITALREQUIREMENTS, AS WELL AS AN ABILITY TO OBTAIN CREDIT FROM PRIVATE PARTIES. THERE
IS NO ASSURANCE THAT THIS SUPPORT WILL CONTINUE IN THE AMOUNTS NECESSARY TO
SATISFY AMTRAK'S CAPITAL NEEDS. In addition to federal funding, Amtrak has
received funding from various states to support, among other things, passenger
rail service within or between states, acquisitions and rehabilitation of
equipment and construction of and improvements to rail infrastructure and train
stations. Amtrak expects to be dependent on federal and state capital grants
indefinitely to fund major repairs to, and replacements of, its facilities,
railway, tunnels and equipment and for repayment of principal under long-term
loans and lease arrangements, including payments with respect to the facility
sublease and indirectly, the certificates. State capital grants will also be
necessary for Amtrak to realize the revenue expected from planned high-speed
rail programs throughout the country. Without a steady level of capital funding
from the state governments or alternative sources of funding, there will be
insufficient monies to fund Amtrak's expected capital needs. See "RelevantParties--Amtrak--Financial Information--Summary of Historical Federal and State
Assistance."CAPITAL SUPPORT IS NECESSARY TO MAKE PAYMENTS ON OBLIGATIONS, INCLUDING
PAYMENTS ON THE FACILITY SUBLEASE AND INDIRECTLY THE CERTIFICATES. Amtrak has
historically funded principal payments on most of its indebtedness and capital
leases from federal capital appropriations. Both the DOT IG and GAO have
indicated doubts about Amtrak's ability to fund its capital needs. The DOT IG
Assessment characterizes Amtrak's capital outlook as "grave" and notes that,
based on Amtrak's estimates of cash losses, Amtrak will not have sufficient
funds to satisfy its minimal capital needs and would suffer a shortfall of
$91 million in Fiscal Year 2001, with continued shortfalls totaling
$298 million through Fiscal Year 2004. In the DOT IG Assessment, the DOT IG
restated Amtrak's targets, stating that Amtrak would suffer cash losses beyond
those estimated by Amtrak in the Fiscal Year 2000 business plan. In addition,
the DOT IG Assessment raises concerns about Amtrak's ability to fund capital
projects which are to be jointly developed by Amtrak and the states, because the
DOT IG believes that a number of these projects require an Amtrak contribution
to pay for a portion of the capital costs and questions whether Amtrak would
have sufficient moneys available to provide necessary funding. There is no
assurance that sufficient federal capital appropriations will be made available
to Amtrak to fund all of its capital needs. If in future fiscal years, Amtrak
does not receive an amount of federal capital appropriation required to sustain
its then current capital service needs, Amtrak may be required to consider
restructuring the scope of its business to reduce its capital service needs.
14
P-->

If capital funds were ever insufficient to cover its debt payments, Amtrak
would expect to use cash from operating revenues to cover those payments. There
can be no assurance that Amtrak will not suffer operating losses or cash losses
in amounts that would impair its ability to fund its necessary capital
requirements. There is no assurance that Amtrak will have sufficient funds to
make payments on all its obligations, including payments on the facility
sublease and indirectly, the certificates. See "--Other Business Risks."IF THE FEDERAL GOVERNMENT DOES NOT PROVIDE A CONSISTENT AND DEDICATED CAPITAL FUNDING SOURCE FOR CORRIDOR DEVELOPMENT AND AMTRAK IS UNABLE TO OBTAIN FUNDS FROM OTHER SOURCES FOR DEVELOPMENT, AMTRAK WILL BE UNABLE TO FUND CORRIDOR
DEVELOPMENT. Amtrak relies on the federal government and other sources for
funds for corridor development projects. There is no assurance that the federal
government or other sources of funds will provide funding, and even if provided,
there is no assurance that the funding will be sufficient for its intended use.
There is also no assurance that legislation will be enacted or what the level of
state participation will be, if any. It is not likely that any federal or state
funding would be sufficient by itself and other sources of capital funding will
be necessary. See "--Legal And Regulatory Risks of Amtrak." If Amtrak were
unable to obtain funds from federal legislation or capital funding from the
federal government or from other sources for development, it would be unable to
undertake the development.
CAPITAL WILL BE REQUIRED TO PURCHASE EXISTING ROLLING STOCK AND OTHER ASSETS
SUBJECT TO LONG-TERM LEASES. Amtrak also finances a portion of its capital
investments through debt incurrence and capital lease arrangements with private
parties. These arrangements are usually related to Amtrak's procurement of
capital assets such as rolling stock. See "Relevant Parties--Amtrak--Descriptionof Capitalization" and "--Other Business Risks."
As of December 31, 2001, Amtrak had financed approximately $3.3 billion of
the original cost of its rolling stock through debt and long-term leases, and
Amtrak expects to finance most of its new rolling stock acquisition, including
the high-speed trainsets and locomotives, through long-term leases. These leases
have early purchase options in the out-years allowing Amtrak to purchase the
equipment. If Amtrak were to exercise all of these early purchase options, the
estimated cost would be more than $600 million over the next 20 years. Amtrak
will require capital to exercise these early purchase options, either from
government grants or private refinancing. If the early purchase options cannot
be exercised, or if Amtrak does not buy the equipment at the fair market value
at the end of the terms, Amtrak will be required to return the leased rolling
stock and locomotives to the lessors. There is no assurance that Amtrak will
have sufficient capital to purchase this financed equipment.
OTHER BUSINESS RISKS
As with any large transportation company, Amtrak's financial performance is
subject to numerous business risks. Any of these factors alone, or in
combination with others, could affect Amtrak's performance and financial
condition.
CONTINUED OPERATING LOSSES MAY RESULT IN A LOSS OF LIQUIDITY. Amtrak's
operating losses have been funded with the proceeds of defeased sale and
leaseback transactions, congressional appropriations and short-term bank loans.
See "Relevant Parties--Amtrak--Description of Capitalization--Long-termIndebtedness and Capital Leases" and "Relevant Parties--Amtrak--Description ofCapitalization--Interim Financings, Unsecured Credit Facilities and OperatingLeases."
Amtrak expects to manage its liquidity requirements during Fiscal Year 2002
through a combination of proceeds from asset monetizing transactions and
short-term bank borrowings. There is no assurance that these goals will be
achieved. Amtrak closed several sale and leasebacks in Fiscal Year 2000 and
Fiscal Year 2001, some of which were defeased one-time transactions. Amtrak is
pursuing similar and other asset monetizing transactions in Fiscal Year 2002.
There is no assurance that these transactions will be consummated.
15
P-->

No assurance can be made that operating losses will not continue or will not
be larger than assumed in Amtrak's capital and operating plans for Fiscal Year
2002. Additionally, no assurance can be made that Amtrak will continue to
maintain financial liquidity in the face of losses. See "--Risks RegardingFunding for Capital Expenditures."AMTRAK'S ASSUMPTIONS ABOUT THE IMPLEMENTATION OF ACELA SERVICE MAY BE INACCURATE AND MAY NEGATIVELY IMPACT AMTRAK'S REVENUES OR FINANCIAL
CONDITION. By the end of Fiscal Year 1999, Amtrak had made progress toward
achieving the goals established in the original business plan through
incremental improvements and changes to its existing service. However, Amtrak's
actual budget result for Fiscal Year 2000 fell short of the Fiscal Year 2000
business plan budget goal by approximately $109 million, primarily as a result
of delays in the receipt of the Acela high-speed fleet which resulted in the
loss of assumed revenues. With no high-speed service implemented in Fiscal Year
2000 and only two Acela Regional trains in operation beginning in January 2000,
ticket revenues fell short of Amtrak's expectations by over $150 million in
Fiscal Year 2000. Amtrak further estimated in its Fiscal Year 2001 business plan
that these factors would continue to negatively impact its results for Fiscal
Year 2001, with the targeted budget result equal to a loss of approximately
$119 million. Amtrak's actual budget result for Fiscal Year 2001 was equal to a
loss of $282 million, with a delay in receipt of Acela equipment leading to
approximately $30 million of that loss. See "Relevant Parties--Amtrak--FinancialInformation--Summary of Financial Information".
Amtrak continues to experience delays in receipt of trainsets and in
implementation of full Acela service, which could adversely affect its financial
condition and revenues in Fiscal Year 2002. Although Amtrak expects that Acela
service will be fully operational by the spring of 2002, there can be no
assurance that there will not be delays in delivery of the Acela Express
trainsets beyond those currently anticipated, that the delays will not
negatively impact full implementation of the Acela service or that any delays
would not reduce ticket revenues by more than currently assumed by Amtrak. The
economic impact of these delays might be greater than is currently contemplated,
and could adversely affect Amtrak's financial condition and ability to make
payments on its obligations, including the facility sublease, and indirectly,
the certificates.
ASSUMPTIONS RELATED TO THE DEVELOPMENT OF THE MAIL AND EXPRESS DELIVERY SERVICE BUSINESS MAY PROVE INACCURATE WITH NEGATIVE IMPACT ON AMTRAK'S REVENUES
AND FINANCIAL CONDITION. The original business plan envisioned a Fiscal Year
2001 mail and express delivery service revenue of approximately $260 million
based on the assumption that freight partnerships would be fully executed by
October 2000. The Fiscal Year 2001 business plan was more conservative in its
approach to equipment and facility expansion and the execution of freight
partnership agreements. Growth was anticipated to be strong, growing from
$122 million in Fiscal Year 2000 to $181 million in Fiscal Year 2001. The Fiscal
Year 2001 business plan assumed that the mail and express delivery service
business would expand significantly, especially in Fiscal Years 2001 to 2003.
However, in 2001, mail and express revenue totaled only $117 million due
primarily to the declining economy. Further negative economic impacts,
limitations on capital, delays in equipment acquisition, scheduling and terminal
availability problems and delays developing partnerships and other factors may
further delay or limit the growth of the mail and express delivery service
business.
Expansion of the mail and express delivery service business involves many
risks, including shortages of locomotives and other rolling stock, equipment,
materials and labor; the inability to construct necessary facilities; work
stoppages and labor disputes; weather interferences; unforeseen construction and
implementation problems; freight interference issues; congestion on lines;
unanticipated cost increases; and appropriations from federal and state
governments. See "--Legal And Regulatory Risks of Amtrak." The impact on
Amtrak's operations that could occur if the anticipated mail or express delivery
business expansion is not implemented or encounters difficulties cannot be
reliably estimated.
16
P-->

RECENT EVENTS MAY NEGATIVELY IMPACT THE FINANCIAL MARKETS OR AMTRAK'S
OPERATIONS, RIDERSHIP OR FINANCIAL CONDITION. On September 11, 2001, the United
States was subjected to multiple terrorist attacks, resulting in the loss of
many lives and massive property damage and destruction in New York City, the
Washington D.C. area and Pennsylvania. As a result, there has been considerable
uncertainty in the world financial and travel markets. The full impact of these
events on financial markets is not yet known but could include, among other
things, increased volatility in the price of securities, including the
certificates. According to publicly available reports, the financial markets are
in part responding to uncertainty with regard to the scope, nature and timing of
possible military responses led by the United States, as well as disruptions in
air travel, substantial losses by various companies including airlines,
insurance providers and aircraft makers, the need for heightened security across
the country and decreases in consumer confidence that could cause a general
slowdown in economic growth. These disruptions and uncertainties could
materially adversely affect Amtrak's operations, ridership or financial
condition and its ability to make payments on the facility sublease and,
indirectly, the certificates.
AMTRAK IS REQUIRED BY LAW TO REDEEM ITS COMMON STOCK, AND THE COST OF REDEMPTION MAY MATERIALLY EXCEED AMTRAK'S EXPECTATION AND HAVE A MATERIAL
ADVERSE EFFECT ON AMTRAK'S FINANCIAL CONDITION. The Amtrak Reform Act requires
that Amtrak redeem its common stock by October 1, 2002 at fair market value.
Amtrak has commenced negotiations with the holders of its common stock, but has
not resolved this issue. The economic impact of a redemption cannot be reliably
estimated at this time. Although Amtrak does not believe the stock has value, it
has made an offer to redeem the stock for cash at a price of $0.03 per share,
which the stockholders have rejected. See "Relevant Parties--Amtrak--
Description of Capitalization--Preferred and Common Stock." No assurance can be
made that Amtrak will not be required to make payments to holders of its common
stock or that any payments would not adversely affect its financial condition
and its ability to make payments on the facility sublease and, indirectly, the
certificates.
AMTRAK'S EXPENDITURE OF TAXPAYER RELIEF ACT FUNDS HAS BEEN QUESTIONED BY THE
GAO, AND A GAO DETERMINATION THAT AMTRAK IMPROPERLY EXPENDED FUNDS MAY ADVERSELY
AFFECT AMTRAK'S FINANCIAL CONDITION. The Taxpayer Relief Act provided Amtrak
with approximately $2.2 billion in funds to be used for qualified expenditures,
as defined in the Taxpayer Relief Act. Although the Reform Council is required
to monitor Amtrak's expenditures of Taxpayer Relief Act funds, it has deferred
to a review of the use of the funds conducted by the GAO. Amtrak is also
required to report on expenditures of Taxpayer Relief Act funds to the Internal
Revenue Service, which has ultimate responsibility for determining whether the
funds were properly spent. See "Relevant Parties--Amtrak--Legal Structure andOversight--Oversight." Under the Taxpayer Relief Act, Amtrak is to repay to the
United States Taxpayer Relief Act funds if the Internal Revenue Service
determines any funds were improperly used. The Internal Revenue Service is
required to make a demand for repayment.
In the GAO March 15, 2000 report relating to Amtrak's expenditure of
Taxpayer Relief Act funds, the GAO stated that through June 1999, Amtrak
expended approximately $1.3 billion of the $2.2 billion provided under the
Taxpayer Relief Act. The GAO Taxpayer Relief Act Report found that Amtrak did
not properly review the 1998 capital projects to determine whether they met
criteria under the Taxpayer Relief Act. Nevertheless, based on its review, the
GAO concluded that the expenditures appeared eligible, other than three
expenditures equal to $9 million. Amtrak believes that it properly reviewed
projects for eligibility and followed the guidance provided by its legal
counsel, and believes that all three expenditures are eligible expenditures
under the Taxpayer Relief Act.
Even though Amtrak disagrees with the GAO findings, Amtrak revised its 1998
report to the Internal Revenue Service regarding its use of Taxpayer Relief Act
funds, as it is legally permitted to do, to reflect a change in funding source
for the questioned $9 million of expenditures. Furthermore, Amtrak asked its
Inspector General to review the $199 million of expenditures relating to the
Fiscal Year 1998 capital projects being questioned. The GAO recommended that the
Inspector General
17
P-->

provide its review of the expenditures to the Internal Revenue Service for a
determination of the propriety of these expenditures. Amtrak's Inspector General
has retained an independent accounting firm to review Amtrak's expenditures of
Taxpayer Relief Act funds and to prepare the Inspector General's Taxpayer Relief
Act Report. Additionally, Amtrak has asked the Internal Revenue Service to
review the three expenditures questioned by the GAO to determine whether these
expenditures were qualified expenditures under the Taxpayer Relief Act. The
Inspector General has informed Amtrak that it intends to provide the Inspector
General's Taxpayer Relief Act Report to the Internal Revenue Service.
The Internal Revenue Service is conducting a due diligence review regarding
these expenditures. The GAO did not conduct a full audit of Amtrak's
expenditures, and the GAO Taxpayer Relief Act Report is not binding upon the
Internal Revenue Service. Ultimately, the Internal Revenue Service is
responsible for determining whether Amtrak misused Taxpayer Relief Act funds.
There can be no assurance that the Internal Revenue Service will not determine
that Amtrak has improperly spent Taxpayer Relief Act funds and demand repayment
of specified amounts. The impact on Amtrak's financial condition that may result
from any determination cannot be reliably estimated.
AMTRAK COULD BECOME SUBJECT TO A BANKRUPTCY PROCEEDING IF IT DEFAULTED UNDER
ITS EXISTING DEBT OBLIGATIONS OR ANOTHER ADVERSE EFFECT OCCURRED WHERE IT COULD NOT PAY ITS DEBTS AS THEY BECOME DUE. IF AMTRAK WERE TO BECOME SUBJECT TO A
BANKRUPTCY PROCEEDING, THE CERTIFICATEHOLDERS WOULD BE ADVERSELY AFFECTED. In
the event Amtrak's financial circumstances should deteriorate, a petition could
be filed, voluntarily by Amtrak or involuntarily by its creditors, under the
United States Bankruptcy Code, which includes special railroad reorganization
provisions. In the event of bankruptcy, there could be adverse effects on the
holders of certificates, including payment delays, reductions, or failure by
Amtrak to make payments on the facility sublease or comply with its other
agreements.
During the pendency of a bankruptcy proceeding, the automatic stay
provisions of the Bankruptcy Code would generally prevent any actions to enforce
Amtrak's payment and other obligations under agreements. The trustee might
therefore be unable to make payments to the certificateholders from funds held
by the trustee under the Trust Agreement. Moreover, under the Bankruptcy Code,
Amtrak might be able to reject the facility sublease and any other contracts
executed by Amtrak in connection with the issuance of the certificates, which
could excuse Amtrak from further obligations under those contracts. Some
pre-petition payments made by Amtrak also could be avoided as preferential
payments and recipients of those payments would be required to return the
payments to the bankruptcy trustee. Additionally, Amtrak might be able, with the
approval of the bankruptcy trustee, but without the consent and over the
objection of any other party, to assign its rights and obligations under the
facility sublease or other agreements to another entity.
Creditors with liens on Amtrak's property, including the federal government,
might foreclose their liens. The extent to which the claims of secured creditors
could be paid would depend on the value of assets available to satisfy those
claims. The value of Amtrak's property is untested and may be affected by
easements held by commuter and freight railroads. Moreover, while Amtrak's
locomotives may be usable by other railroads, the sale or lease of passenger
cars might generate little cash because the cars might need to be reconfigured
to accommodate needs of any purchasing railroad. If the assets were insufficient
to repay amounts owing to secured creditors, the secured creditors would have
the right to assert unsecured claims against Amtrak. In addition, other persons
and entities may have unsecured claims against Amtrak, such as persons or
entities that have contracts with Amtrak, employees of Amtrak and persons with
tort claims against Amtrak.
Special provisions of the Bankruptcy Code, including without limitation,
Sections 1161 through 1174 of the Bankruptcy Code, apply to railroad
reorganizations and seek to protect the public interest in continued rail
service. Although the Bankruptcy Code requires that the trustee and the
bankruptcy court consider the public interest in addition to the interests of
the debtor railroad, creditors and
18
P-->

stockholders, court decisions hold that rights of secured creditors should not
generally be affected by this mandate. However, a railroad may be liquidated if
a court determines, among other things, that liquidation is in the public
interest, and it must be liquidated if a plan of reorganization is not confirmed
within five years after the bankruptcy filing. If liquidation does occur under
the Bankruptcy Code, there is no assurance that the proceeds of the liquidation
would be sufficient to pay the certificateholders, in whole or in part.
AMTRAK OPERATIONAL PERFORMANCE IS SUBJECT TO OPERATIONAL RISKS WHICH COULDRESULT IN SUSPENSION OR IMPAIRMENT OF SERVICE, INCREASED EXPENSE AND DECREASED
REVENUE. The operation of rail service involves many risks, including schedule
delays due to freight railroad congestion or weather-related or other
conditions; the breakdown or failure of equipment and computer systems; the
inability to obtain, or increases in costs of, locomotives and other rolling
stock, equipment, fuel, materials or supplies; project delays; market
fluctuations; operational error; labor shortages or disputes or work stoppages;
fires, floods, tornadoes, earthquakes, hurricanes and other similar events;
damage to or destruction of its properties, including locomotives or other
rolling stock or equipment; and liabilities, such as personal injury and
property damage, due to accidents. There can be no assurance that the occurrence
of any of these events or combination of events would not cause delays,
curtailment of service or decreases in ridership on one or more of Amtrak's rail
lines or result in the incurrence of liabilities by Amtrak which could adversely
affect its operations and financial condition.
AMTRAK'S COST OF OPERATION COULD PROVE TO BE GREATER THAN ESTIMATED BY
AMTRAK. Amtrak's operating costs have been increasing in each fiscal year and
Amtrak expects that its operating costs will continue to increase for the
foreseeable future. See "Relevant Parties--Amtrak--Description ofCapitalization--Capital Investment Program." The GAO Cost Report states that
Amtrak's labor costs continue to represent over 50% of Amtrak's total operating
costs and these costs grew from approximately $1.3 billion in 1995 to
approximately $1.4 billion in 1999. Amtrak's interest costs increased from
$50 million to $83 million and its payments to other railroads increased from
$92 million to approximately $100 million in that period. Similarly, the DOT
IG's March 21, 2001 testimony before the Subcommittee on Transportation and
Related Agencies, Committee on Appropriations, notes that although revenue and
ridership trends have shown positive results, increases in labor costs, train
operation expenses, depreciation and maintenance-of-way expenses have fueled
continued growth in operating expenses. In 2000, although total operating
revenue increased by 9.8%, total operating expenses increased by 8.1% on an
accrual basis, and during 2001, although operating revenue increased by 6.2%,
operating expenses increased by 8.3% on an accrual basis over 2000. Amtrak's
operating costs can also increase due to new equipment related regulations, such
as regulations that increase the frequency of inspection and maintenance of
equipment. See "--Legal And Regulatory Risks of Amtrak." There can be no
assurance that Amtrak will generate revenues sufficient to cover increases in
its operating costs, which could adversely affect its financial condition.
The Amtrak Reform Act removed all statutory protection for Amtrak employees,
resulting in submission of employee protections to binding arbitration. In
November 1999, the pre-existing provisions applicable to Amtrak employees were
modified, resulting in economic benefits to Amtrak. Despite these improvements,
Amtrak's labor protection obligations, particularly to employees with many years
of service, remain high compared to non-railroad corporations in the United
States. Amtrak was notified in November 1999 that the collective bargaining
agreements with its employees would be subject to renegotiation. See "RelevantParties--Amtrak--Description of Amtrak's Business--General Business Description
and Organizational Structure." No assurance can be made that future negotiations
between Amtrak and its employees will not result in increased labor costs, which
increase could adversely affect its operations and financial condition.
CONTINUED OPERATING LOSSES AND DEPENDENCY ON CAPITAL GRANTS CREATES A RISK
OF DEFAULT ON AMTRAK INDEBTEDNESS AND OTHER OBLIGATIONS. Amtrak has entered
into a number of debt and capital lease arrangements to fund various capital
programs, aggregating over $3.3 billion. Under these
19
P-->

arrangements, virtually all of Amtrak's rolling stock acquired since 1990 is
either leased or subject to the lien of a secured party. Continued operating
losses and dependency on capital grants creates a risk of default on its
indebtedness and other obligations. See "Relevant Parties--Amtrak--Descriptionof Capitalization." A default by Amtrak under, or acceleration of, Amtrak's
indebtedness will result in cross-default to other Amtrak indebtedness and may
have a material adverse effect on the certificates.
AMTRAK'S COSTS AND REVENUES COULD BE SUBSTANTIALLY ADVERSELY AFFECTED BYCOMPETITION FROM AIRLINES, BUS TRANSPORTATION AND ALTERNATIVE MODES OF TRANSPORTATION, OR COMPETITION FROM ALTERNATIVE CARRIERS OF MAIL AND EXPRESS
DELIVERY PACKAGES. Amtrak serves several distinct geographic and demographic
markets. Levels of competition vary in the different geographic and demographic
markets Amtrak serves and in respect of the various types of services it
provides. See "Relevant Parties--Amtrak--Description of Amtrak's Business."
Revenues from Amtrak's Northeast Corridor operations comprise a significant
portion of its total revenues. This regional concentration makes Amtrak
potentially susceptible to changes in regional operations and competitive
factors that may adversely affect its competitive position, its financial
condition and results of operations. There is no assurance that Amtrak will
continue to maintain or increase its market share.
The Fiscal Year 2001 business plan assumed certain increases in ridership
and revenues on the Northeast Corridor primarily as a result of implementation
of the Acela Express high-speed rail service. Whereas the Fiscal Year 2001
business plan projected Northeast Corridor ticket revenues of approximately
$739 million, the actual revenues realized were approximately $674 million, with
approximately one-half of the $65 million shortfall attributable to economic
developments, and approximately one-half of the shortfall attributable to delays
in receipt of Acela equipment. Actual Northeast Corridor ridership for Fiscal
Year 2001 exceeded Fiscal Year 2000 ridership by five percent but fell short of
Fiscal Year 2001 business plan projections by six percent, 2 1/2% of which
shortfall was attributable to the delay in receipt of equipment, and 3 1/2% of
which was attributable to economic developments. There can be no assurance that
subsequent projections of increased ridership and revenues attributable to
implementation of Acela Express high-speed service will be realized. See
"Relevant Parties--Amtrak--Financial Information--Summary of FinancialInformation" and "--Other Business Risks."
Amtrak generates a portion of its revenues from contracts with commuter
agencies under which it operates and maintains commuter trains on the Northeast
Corridor. This business has consistently been growing. However, those contracts
are typically subject to competitive bidding, and there is no assurance that
Amtrak will continue to maintain its existing contracts or obtain new contracts.
See "Relevant Parties--Amtrak--Description of Amtrak's Business."
Amtrak Intercity operates long-distance trains over freight railroad lines,
short-distance hub trains from central cities and a mail and express delivery
service business. The 2000 Reform Council Report states that intercity passenger
rail service has not increased in the last decade, with Amtrak carrying
approximately the same number of passengers in Fiscal Year 1998 as it did in
Fiscal Year 1990. While Amtrak has assumed continued growth of its mail and
express delivery service business, there is no assurance that its mail and
express delivery service business will grow or will grow at the rates assumed by
Amtrak.
Amtrak West operates commuter services serving the States of California,
Oregon and Washington, as well as Vancouver, British Columbia. It also operates
one long-distance train between Los Angeles, California and Seattle, Washington.
Alternative modes of transportation are Amtrak's primary competitors in these
areas. There is no assurance Amtrak will continue to remain competitive with
these alternative modes of transportation
20
P-->

THE ACTIONS AND GOALS SET FORTH IN AMTRAK'S PAST AND FUTURE BUSINESS PLANSMAY NOT BE ACHIEVED AND SHOULD NOT BE RELIED UPON AS PREDICTIONS OF FUTURE
PERFORMANCE. Each of Amtrak's business plans in past years and Amtrak's
operating and capital budgets assume, and the Fiscal Year 2002 business plan as
well as any subsequent business plan prepared by Amtrak may assume, successful
implementation of the activities described in the business plans and the effect
of these activities on revenue and operating and capital costs. They also make
other assumptions, including relating to ridership on its passenger trains,
implementation of various expansion plans and continued federal and state
government subsidies and availability of alternative capital sources to support
its capital investment program. Assumptions, projections and estimates are
inherently subject to significant uncertainties beyond the control of Amtrak,
such as general business, market and economic conditions, prices for goods and
services and other matters, and, in the case of funds from federal and state
governments, are subject to appropriations by appropriate governing bodies.
Actual results may differ materially from those projected. In the past, for a
variety of external and other reasons, Amtrak has not met many of the goals
outlined in its business plans, and budget shortfalls have been significant.
Accordingly, the information included in the business plans and Amtrak's
budgets are not necessarily indicative of future performance. Therefore, no
representation is made or intended, nor should any be inferred, about the likely
existence of any particular future set of facts or circumstances, and
prospective investors are cautioned not to rely on the assumptions, projections,
targets and estimates used in preparing the business plans and operating and
capital budgets. If actual results are less favorable than those shown, or
assumptions used in formulating the projections, estimates or targets are
incorrect, Amtrak's financial performance may also be less favorable, and
consequently, the ability of Amtrak to pay its obligations under the facility
sublease, and the ability of Amtrak to pay operating costs and debt service on
debt may be materially and adversely affected. See also "--Legal And Regulatory
Risks of Amtrak--Special Note Regarding Forward-Looking Statements."LEGAL PROCEEDINGS
Amtrak is involved in various litigation and arbitration proceedings in the
normal course of business. The outcome of any litigations or arbitrations,
including the proceedings described below, cannot be predicted with certainty.
In the event the following proceedings were determined adversely to Amtrak's
interests, Amtrak's business, operations and financial condition could be
adversely affected, and its ability to make payments on its obligations,
including the facility sublease, and indirectly, the certificates, could be
affected.
CAMPBELL ET AL. V. AMTRAK
On November 9, 1999, a class action race discrimination complaint was filed
against Amtrak in the U.S. District Court for the District of Columbia. The
lawsuit was later amended to include 73 named individuals and one union, and
purports to represent a class of all African American employees who have applied
for employment, have worked in the past or currently work at Amtrak except for
members of the Brotherhood of Maintenance of Way Employees union within Amtrak's
Northeast Corridor strategic business unit. The lawsuit alleges race
discrimination with regard to hiring, promotion, training, terms and conditions,
discipline and creating a hostile work environment. The plaintiffs are seeking
unspecified monetary damages, as well as declaratory and injunctive relief and
punitive damages. On January 24, 2001, the trial court denied Amtrak's motion to
dismiss class claims. On September 6, 2001, the trial court granted in part
Amtrak's motion for more definite statement with respect to the individual
claims. As a result, the Court ordered the plaintiffs to file an amended
complaint. On December 20, 2001, the plaintiffs filed a third amended complaint.
Amtrak's response is due on February 2, 2002.
21
P-->

BAY STATE TRANSIT SERVICES, LLC V. NATIONAL RAILROAD PASSENGER CORPORATIONET AL.
On September 13, 2001, Bay State Transit Services, LLC filed suit in federal
court for the District of Columbia against Amtrak and 12 of Amtrak's labor
unions, alleging that Amtrak and the unions conspired, in violation of the
antitrust laws, to deprive Bay State of a contract it had entered into with the
Massachusetts Bay Transportation Authority's Commuter Rail Division to provide
mechanical services for a period of five years, and tortiously interfered with
Bay State's contractual and business relations with the Massachusetts Bay
Transportation Authority. The suit alleges damages including, but not limited
to, at least $30,000,000 in lost profits, treble the amount of actual damages
proven at trial, and punitive damages. On November 13, 2001, Amtrak filed a
motion for summary judgment on and/or dismissal of all of Bay State's claims. No
decision has yet been made on Amtrak's motion.
BOMBARDIER CORPORATION V. NATIONAL RAILROAD PASSENGER CORPORATION
On November 8, 2001, Bombardier Corporation filed a complaint in federal
court for the District of Columbia against Amtrak alleging that Amtrak caused
Bombardier to incur substantial additional costs on a project requiring
Bombardier and its consortium partner, Alstom Transportation, Inc., to design
and manufacture high-speed electric passenger trainsets and locomotives, design
and construct three facilities for the maintenance of the trainsets and
locomotives, and maintain the trainsets. Bombardier's complaint is based on
breach of contract, promissory estoppel, quantum meruit and unjust enrichment
and requests an award of damages of not less than $200 million. Counsel for
Amtrak believes that Amtrak has significant procedural and substantive defenses
to the suit, and on December 3, 2001, Amtrak filed a motion to dismiss the
complaint. On December 17, 2001, Bombardier filed its response to Amtrak's
motion, and Amtrak's reply is due on January 15, 2002.
NORTHEND ELECTRIFICATION CONTRACT CLAIMS
In December 1995, Amtrak entered into a $321 million fixed-price contract
with a joint venture consisting of Balfour Beatty Construction, Inc. and Mass.
Electric Construction Co. To date, the value of the contract is approximately
$486.5 million. Under the contract, the joint venture was to design and
construct an electrified catenary system along the Northeast Corridor
right-of-way between New Haven, CT, and Boston, MA, so that upon completion of
the system Amtrak could operate electrified high speed train service from
Washington, DC, to Boston. The contract requires a formal dispute resolution
procedure before a dispute resolution board for claims in excess of $100,000.
Decisions on claims above $2.5 million are subject to review in federal court.
As of November 30, 2001, the joint venture has made approximately 45 claims,
the total value of which is approximately $118 million. None of these claims
have been resolved by the dispute resolution board or the court. The claims are
based upon various theories of recovery, including alleged problems with site
conditions, baseline design prepared by a preceding contractor, owner-directed
changes, work interference, and schedule acceleration. Amtrak is vigorously
defending all of the claims. Amtrak holds $11 million in retainage, and already
has paid $35 million of the claimed amounts. In addition, Amtrak is asserting
claims against the joint venture for a variety of contract non-compliance
issues, and the United States has undertaken both civil and criminal
investigations of the joint venture that may result in additional claims against
the joint venture.
ENVIRONMENTAL REGULATION MAY ADVERSELY AFFECT AMTRAK'S OPERATIONS OR
FINANCIAL CONDITION. Some of Amtrak's past and present operations as well as
past operations by third parties on property currently owned by Amtrak involve
or involved activities which are subject to extensive and changing federal and
state environmental regulations. From time to time, Amtrak is involved in
administrative and judicial proceedings and administrative inquiries related to
environmental matters. For example, historic electric train operations at some
sites owned or operated by Amtrak are associated with contamination by
polychlorinated biphenyls or, "PCB's." Amtrak addresses these sites on a
case-by-case basis in coordination with the appropriate regulatory authorities.
22
P-->

No assurance can be made that regulation relating to environmental issues,
or the costs resulting from environmental liabilities, will not adversely affect
Amtrak's operations or financial condition. Environmental costs may include,
among other things, the costs of investigation of potentially contaminated
sites, as well as costs for remediation and restoration of sites determined to
be contaminated. There are a number of current environmental matters that are
the subject of administrative inquiries or proceedings; although there can be no
guarantees, Amtrak does not believe that any of these matters, either
individually or collectively, will materially affect its business operations or
its ability to satisfy its obligations under the agreements to which it is a
party.
LEGISLATIVE MODIFICATIONS MAY AFFECT AMTRAK'S OPERATIONS OR FINANCIAL
CONDITION. Amtrak is subject to oversight by various federal agencies and
requires subsidies from the federal and state governments. Its operations and
funding are subject to continued political scrutiny. See "RelevantParties--Amtrak--Legal Structure and Oversight."
There is no assurance that Congress will not pass legislation that will
significantly alter Amtrak's purpose, operations, or the level or type of
oversight, or that the level of federal or state funding for Amtrak would not
alter the manner in which Amtrak conducts its business, including the types and
manner of services that Amtrak provides and Amtrak's ability to establish and
alter its routes. In addition, legislative actions may constitute "Special
Events" under several of Amtrak's long-term debt and lease obligations. A
Special Event occurs with respect to a particular financing if, as a result of:
(a) a change in ownership of Amtrak involving a cessation of Amtrak's or any
assignee of Amtrak's support from the United States government, (b) a change in
any law which modifies or affects the principal purpose of Amtrak or any
assignee of Amtrak, or (c) the revocation, suspension or non-renewal of any
authorization, license, or consent necessary for the operation of the business
of Amtrak or any assignee of Amtrak, there is a material adverse change in the
business, operations or properties of Amtrak that causes its ability to perform
its obligations under documents relevant to that financing to be materially and
adversely affected. If a Special Event occurs, the counterparty to the loan or
lease may require Amtrak to refinance those arrangements, and the failure to
effect the refinancing will result in a default. The impact on Amtrak's
operations or its financial condition, or its ability to meet its financial
obligations, including payments on the facility sublease that indirectly
finances payments on the certificates, which may result from legislative
modifications cannot be reliably estimated.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS. This prospectus contains
forward-looking statements that are subject to a number of risks and
uncertainties, many of which are beyond the control of Amtrak. All statements,
other than statements of historical facts included in this prospectus, regarding
Amtrak's strategy, future operations, financial position, forecasts, targets,
estimates, revenues or revenue growth, projected costs, prospects, plans and
objectives of Amtrak are forward-looking statements. When used in this
prospectus, the words "may,""intend,""will,""should,""would,""could,""potential,""expect,""anticipate,""believe,""estimate,""plan,""predict,""forecast,""target," or "continue" and similar expressions, are intended to
identify forward-looking statements, although not all forward-looking statements
contain these identifying words. All forward-looking statements speak only as of
the date of this prospectus. Undue reliance should not be placed on these
forward-looking statements. Although Amtrak believes that its plans, intentions
and expectations reflected in or suggested by the forward-looking statements
made in this prospectus are reasonable, there can be no assurance that these
plans, intentions or expectations will be achieved. Important factors which
could cause the actual results to differ materially from these expectations are
disclosed under "Risk Factors" and elsewhere in this prospectus. These
cautionary statements qualify all forward-looking statements attributable to
Amtrak or persons acting on its behalf.
23
P-->

RELEVANT PARTIESTHE ISSUER
Amtrak/Pennsylvania Station Lease Finance Trust--2001 is a New York common
law trust. See "Description of the Trust Agreement."THE DEPOSITOR
We, A/P I Deposit Corporation, are a Delaware corporation organized on
June 14, 2001 as a wholly-owned limited purpose finance subsidiary of GSS
Holdings, Inc. We maintain our principal office at 400 West Main Street, Suite
338, Babylon, New York11702. Our telephone number is (631) 587-4700. We do not
have, and are not anticipated to have, any significant assets. We originated the
mortgage loan. On the date of issuance of the original certificates, we
transferred the mortgage loan to the issuer.
The Depositor does not currently have, and is not expected in the future to
have, any significant assets.
THE BORROWER
Penn Station Leasing, LLC, a Delaware limited liability company, is a
special-purpose entity whose business is limited to holding the mortgaged
property.
Amtrak is the sole member of the borrower. Pursuant to the Limited Liability
Company Agreement of the borrower, dated June 20, 2001, the borrower has one
independent manager. The borrower cannot, without the prior consent of its
independent manager, the unanimous written consent of the board of directors,
and the consent of Amtrak: (a) engage in any business other than holding the
mortgaged property, or (b) incur additional indebtedness other than indebtedness
permitted under the documents related to the mortgage loan as described under
"Description of the Mortgage Loan--Encumbrances; Additional Indebtedness." The
organizational documents of the borrower require the approval of its independent
manager before the borrower: (a) files a bankruptcy or insolvency petition or
otherwise institutes insolvency proceedings, or (b) dissolves, liquidates,
consolidates, merges, or sells all or substantially all of its assets. No
assurance can be given that the borrower will not file for bankruptcy protection
or that creditors of the borrower will not initiate a bankruptcy or similar
proceeding against the borrower.
AMTRAK THE INFORMATION IN THIS SECTION HAS BEEN PROVIDED TO US BY AMTRAK. WE MAKENO REPRESENTATION AS TO THE COMPLETENESS OR ACCURACY OF THE INFORMATION CONTAINED IN THIS SECTION. INTRODUCTION
The National Railroad Passenger Corporation, commonly known as Amtrak, was
created by Congress in May 1971. With the creation of Amtrak, America's freight
railroads were relieved of their historical obligation to provide intercity
passenger service and Amtrak became America's national intercity rail passenger
company. Today, Amtrak serves over 500 stations in 46 states and operates more
than 260 intercity trains every day. Amtrak is charged with providing a national
system of modern, efficient intercity passenger rail service in order to give
Americans an alternative to automobiles, buses and airplanes to meet their
transportation needs.
From 1971 through December 2001, the federal government provided Amtrak with
approximately $24 billion in financial assistance, including subsidies for
operations and capital improvements. The Amtrak Reform and Accountability Act of
1997 requires that Amtrak achieve operational
27
P-->

self-sufficiency by December 2, 2002, and eliminate its need for federal
operating subsidies, other than to cover taxes payable by Amtrak. See "--LegalStructure and Oversight--Oversight--The Reform Council." In October 1998, Amtrak
developed a strategic business plan for Fiscal Years 1999-2002 that was designed
to meet the dual objectives of creating a modern national rail system and
becoming operationally self-sufficient. Amtrak's original business plan is
updated at least annually and a summary of the updated plan for Fiscal Year 2000
was released in April 2000. Amtrak released the Fiscal Year 2001 business plan
in early February 2001 for Fiscal Years 2001-2005, and is currently in the
process of formulating a revised business plan for Fiscal Year 2002. The
original business plan, the Fiscal Year 2000 business plan and the Fiscal Year
2001 business plan are collectively referred to as the "business plans." In the
past, the business plans have all targeted reaching the goal of operational
self-sufficiency as required by the Amtrak Reform Act. Following the Reform
Council's November 9, 2001 finding that Amtrak will not meet the goal of
self-sufficiency by the required deadline, the Fiscal Year 2002 business plan
may be substantially different from those of prior years. See "RelevantParties--Amtrak--Introduction."
Amtrak expects to be dependent on federal grants indefinitely to fund its
capital investment. See "--Description of Capitalization." Of the approximately
$24 billion in federal support received by Amtrak since its creation,
approximately $11 billion has been provided for capital investment purposes. In
the Taxpayer Relief Act of 1997, Congress provided Amtrak with approximately
$2.2 billion in funds to be used for qualified expenditures, as defined in the
Taxpayer Relief Act. As of December 31, 2001, Amtrak had expended approximately
$2.19 billion of the Taxpayer Relief Act funds. In addition to Taxpayer Relief
Act funds, Congress appropriated $609 million, $571 million and $521 million,
respectively, for Amtrak's capital expenditures for Fiscal Years 1999, 2000 and
2001. Congress has appropriated $521 million for Fiscal Year 2002. See "RiskFactors--Risks Relating to Amtrak--Legal And Regulatory Risks of Amtrak." As
part of the Department of Defense appropriations bill for 2002, Congress
provided $100 million in capital grant funds to Amtrak for expenditure on safety
and security of Amtrak-owned tunnels under the East and Hudson Rivers.
Amtrak may use a portion of its federal capital appropriations for qualified
maintenance of equipment and facilities expenses. Under the Amtrak Reform Act,
beginning in Fiscal Year 2003, this use is capped at the annual value of excess
mandatory railroad retirement taxes paid by Amtrak under the Railroad Retirement
Tax Act. Amtrak's excess mandatory railroad retirement taxes are that portion of
the taxes Amtrak pays under the Railroad Retirement Tax Act that are more than
the amount needed for the cost of benefits payable to Amtrak's retirees and
their beneficiaries. We refer to these in our description of Amtrak as "excess
mandatory RRTA payments."LEGAL STRUCTURE AND OVERSIGHTLEGAL STRUCTURE AND GOVERNANCE
Amtrak was created in 1971 under the Rail Passenger Service Act of 1970, and
is a rail carrier under Parts A, C, D and E of Subtitle V of Title 49 of the
United States Code. It is operated and managed as a private corporation and is
incorporated under the laws of the District of Columbia. Amtrak is subject to
the federal laws applicable to interstate railroads, including those pertaining
to safety, health, employment matters and the environment. Amtrak is not a
department, agency or instrumentality of the United States, and, under current
law, none of its debt is guaranteed by the United States government. Pursuant to
the Rail Passenger Service Act, Amtrak is exempt from all state and local taxes
and fees. Periodically, legislation is enacted which alters Amtrak's operations.
See "Risk Factors--Risks Relating to Amtrak--Legal And Regulatory Risks of
Amtrak."
Amtrak has two authorized classes of stock: preferred with par value of $100
per share and common with par value of $10 per share. There are 109,396,994
authorized preferred shares, all of which are outstanding and are held by the
Secretary of Transportation. There are 10,000,000 authorized
28
P-->

common shares, of which approximately 9,385,694 are outstanding. The outstanding
common shares are held by successors to four of the twenty railroads that
contributed capital to form Amtrak in 1971. The list of stockholders and the
number of shares held appears in "--Description of Capitalization--Preferred andCommon Stock." The preferred stockholders have no voting rights, and the common
stockholders have voting rights only with respect to amending Amtrak's Articles
of Incorporation.
Amtrak is governed by an eight-member board of directors, with seven voting
members appointed by the President of the United States and confirmed, unless
the Secretary of Transportation is the appointee, by the Senate. Except for
Amtrak's president, who is an ex-officio non-voting member of the board of
directors, the terms of the members of the board are five years from the date of
appointment.
The current board members, their principal occupations and their terms of
appointment are:
[Download Table]
George D. Warrington (ex officio) John Robert Smith
President and Mayor,
Chief Executive Officer of Amtrak City of Meridian, Mississippi
Term expiration: June 25, 2003
Michael S. Dukakis Sylvia de Leon
Vice Chairman Chair of the Corporate Affairs Committee
Distinguished Professor of Partner,
Political Science at Northeastern Akin, Gump, Strauss, Hauer and Feld
University Term expiration: July 30, 2004
Term expiration: June 25, 2003
Amy M. Rosen Linwood Holton
Chair of the Finance Committee Director, Mezzullo & McCandlish
Managing Partner, Term expiration: September 24, 2003
Public Private Initiatives
Term expiration: September 24, 2003
Norman Mineta
Secretary of Transportation
Term expiration: June 25, 2003
There is currently one vacancy on the Amtrak board of directors.
OVERSIGHT
1. The Reform Council
The Amtrak Reform Act established the Amtrak Reform Council, an independent
federal commission, to evaluate Amtrak's financial performance and to make
recommendations to Amtrak for achieving cost and productivity improvements and
financial reforms. The Amtrak Reform Act provides that the Reform Council is to
assess Amtrak's ability to reach operational self-sufficiency by Fiscal Year
2003.
The Reform Council has reported periodically to Congress on various matters
relating to Amtrak's operations. The Reform Council released its first annual
report to Congress, entitled "A Preliminary Assessment of Amtrak," on
January 24, 2000. The Reform Council issued its second annual report on
March 19, 2001. The Reform Council did not issue a finding on Amtrak's ability
to reach operational self-sufficiency by Fiscal Year 2003 in either of these
Reform Council Reports, but presented the Reform Council's views on Amtrak's
past performance and issues it believed Amtrak should address in Amtrak's future
activities. In the 2000 Reform Council Report, the Reform Council addressed its
view of the methodology to be used in determining whether Amtrak would meet
operational self-sufficiency, which differed significantly from the methodology
used by Amtrak in developing the business plans. In the 2001 Reform Council
Report, the Reform Council assessed the issues and challenges facing Amtrak
29
P-->

and provided a number of options for fundamental reforms in the institutional
and financial structure of Amtrak. In the 2001 Reform Council Report, the Reform
Council concluded that institutional flaws prevent Amtrak from meeting its
goals. Among the institutional flaws discussed in the 2001 Reform Council Report
are the Reform Council's belief that Amtrak does not perform like a profitable
business because it has been asked to perform too many functions and that
Congress has not provided sufficient funds to successfully perform those
functions. The Reform Council stated its belief that in order to improve
operations and efficiency, Amtrak's operating and infrastructure functions
should be organized as separate entities with independent managements and
financial statements.
On November 9, 2001, the Reform Council made a finding that Amtrak will not
achieve operational self-sufficiency by Fiscal Year 2003. Under the Amtrak
Reform Act, the Reform Council is required to recommend to Congress by
February 7, 2002 an action plan for a restructured and rationalized system of
intercity rail passenger services, and Amtrak is required to submit to Congress
an action plan for its own liquidation by the same date. On December 20, 2001,
Congress enacted legislation providing that Amtrak is not to use appropriated
funds or revenues to develop or submit a liquidation plan as provided for under
the Reform Act until an Amtrak reauthorization act is enacted by Congress.
Accordingly, Amtrak will not submit a liquidation plan by February 7, 2002 as
originally required under the Amtrak Reform Act. The events that have been and
may be triggered by the Reform Council's finding that Amtrak will not achieve
operational self-sufficiency are described in "Risk Factors--Risks Regarding theRestructuring or Liquidation of Amtrak under Section 204 of the Amtrak ReformAct."
Copies of the Reform Council Reports and Findings are available, upon
request, by calling the Reform Council at (202) 366-0598. The Reform Council
Reports and Findings are also available at the Reform Council's website at
www.amtrakreformcouncil.gov.
2. Other Oversight
Amtrak is a "designated federal entity" under Section 8G of the Inspector
General Act of 1978. Amtrak has appointed an Inspector General, who is
responsible to the chairman of Amtrak's board of directors. The Office of
Inspector General of Amtrak is directed by law to investigate and report on
Amtrak operations and advise Congress concerning Amtrak's activities.
Because Amtrak is dependent for financial support on appropriations by
Congress, it is subject to scrutiny by the Appropriations Committees of the
Senate and the House of Representatives, and the Senate Committee on Commerce,
Science and Transportation and the Transportation and Infrastructure Committee
of the House of Representatives. These committees may recommend to Congress
annual appropriations and other legislation that could impact Amtrak. See "RiskFactors--Risks Relating to Amtrak--Risks Regarding Funding for CapitalExpenditures" and "Risk Factors--Risks Relating to Amtrak--Legal And Regulatory
Risks of Amtrak."
Amtrak's financial condition is also monitored by a number of agencies of
the federal government, including the United States General Accounting Office,
or "GAO" and the Office of the Inspector General of the United States Department
of Transportation, or "DOT IG," each of which periodically reports to Congress
or publishes reports regarding Amtrak's financial condition and operations.
Section 409 of the Amtrak Reform Act requires the DOT IG, in any fiscal year
that Amtrak requests federal operating or capital subsidies, to review Amtrak's
operations and assess Amtrak's financial requirements. The findings must be
reported to the Secretary of Transportation and various Congressional committees
before funds are appropriated for Amtrak's capital acquisition, development or
operating expenses.
Copies of reports regarding Amtrak published by the DOT IG can be obtained
by calling the Communications Office of the Inspector General of DOT at
(202) 366-6872, or at the DOT IG's website at www.oig.dot.gov. Copies of reports
regarding Amtrak published by the GAO can be obtained
30
P-->

by calling the Office of the Associate Director, Transportation Issues, of the
GAO at (202) 512-3600, or at the GAO website at www.gao.gov.
3. Oversight Hearings
Congress periodically holds hearings about Amtrak and its operations. On
September 26, 2000, the Senate Committee on Commerce, Science and Transportation
held a Rail Act Hearing regarding legislation, which, had it been enacted, would
have allowed Amtrak to issue up to $10 billion in high-speed rail bonds. See
"Risk Factors--Risks Relating to Amtrak--Legal And Regulatory Risks of Amtrak."
At the Rail Act Hearing, a number of members of Congress, entities which provide
oversight of Amtrak's operations and the Chairman of the Reform Council were
generally critical of Amtrak and its ability to function effectively. The House
Appropriations Subcommittee on Transportation held a hearing regarding Amtrak on
March 21, 2001. George Warrington, president of Amtrak, Kenneth Mead, the
Department of Transportation's Inspector General, and Phyllis Scheinberg, of the
General Accounting Office, provided testimony. On November 21, 2001, George
Warrington testified before the Senate Committee on Commerce, Science and
Transportation that the conflicting policy mandates for Amtrak by Congress--to
provide a public service and to be operationally self-sufficient--constitute a
business model which has been inadequately funded. Warrington pointed to the
need for policy makers to define Amtrak's mission and decide how the system is
to be financed.
Transcripts of these hearings are available by calling the Senate Committee
on Commerce, Science and Transportation at (202) 224-4852, or the House
Appropriations Subcommittee on Transportation at (202) 225-2141.
DESCRIPTION OF AMTRAK'S BUSINESS
Amtrak is an operating railroad with a principal business of providing
common carrier national passenger rail transportation service in the major
intercity travel markets of the United States. Amtrak also provides mail and
express delivery service in conjunction with its passenger rail transportation
service. Amtrak had operating expenses of approximately $3.1 billion and capital
expenditures of $0.9 billion for Fiscal Year 2001. For Fiscal Year 2002, its
operating budget is approximately $3.2 billion and its capital program is
$0.7 billion. In addition to its core business of intercity passenger railroad
operations and mail and express delivery service, Amtrak manages three other
businesses: contract management of commuter railroad operations, project work
for rail agencies and state departments of transportation, such as maintenance
of rights-of-way, characterized in Amtrak's financial statements as
reimbursables, and commercial activities and ventures entered into by Amtrak,
which include retail, real estate, telecommunications and consulting.
Of Amtrak's approximately 24,100 employees, approximately 21,300 are
represented by thirteen different labor organizations and covered by collective
bargaining agreements. Amtrak received notices from the applicable labor
organizations that, effective January 1, 2000, the terms of these collective
bargaining agreements were subject to renegotiation and Amtrak has commenced
negotiations with the labor organizations. The Railway Labor Act of 1926, as
amended, establishes a process for resolving collective bargaining disputes
between railroads, including Amtrak, and their employees, and includes a
preclusion against either side engaging in self-help activities, such as strikes
or lockouts, until the bargaining and mediation procedures established in the
Railway Labor Act have been exhausted. If negotiations between Amtrak and the
labor organizations are unsuccessful, either party may request mediation through
the offices of the National Mediation Board. If mediation is unsuccessful, the
National Mediation Board will issue a notice of release, commonly referred to as
the "30-day cooling-off period." If the 30-day cooling-off period concludes with
no agreement, the parties are free to engage in self-help activities, but may
not make changes to working conditions if a Presidential Emergency Board is
established. An Emergency Board is required to investigate the dispute and
report to the President within 30 days of its appointment, although this may be
extended. During this time,
31
P-->

the parties are obligated to maintain current working conditions. See "RiskFactors--Risks Relating to Amtrak--Other Business Risks."
Amtrak retains liability coverage for bodily injury and property damage
which is financed through a system-wide self-insurance program. The liability
retentions range between $10 million per occurrence for liability which results
from train movements and $2 million per occurrence for all other causes of
liability. Amtrak procures and maintains an excess liability insurance program
with per occurrence limits of $490 million in excess of $10 million and
$498 million in excess of $2 million. The entire excess liability insurance
program is purchased from insurance companies, both captive and commercial,
domiciled offshore in order to secure punitive damages coverage, since that
coverage may not be available in some states. The participation of Amtrak's
captive insurance company in the excess liability insurance program is reinsured
100% through the worldwide reinsurance markets. Section 161 of the Amtrak Reform
Act limits all railroads' liability for passenger injuries to $200 million per
occurrence. Since non-passenger liability is not so limited, Amtrak purchases
excess liability insurance limits beyond the above statutory cap.
In Fiscal Year 1995, Amtrak created three strategic business units, the
Northeast Corridor, Amtrak Intercity and Amtrak West, and in October 2000,
Amtrak created an additional strategic business unit for mail and express
delivery service. The strategic business units are organized along geographic
and market segment lines. The strategic business unit structure was designed to
focus on product delivery and accountability, to enhance customer service,
facilitate decision-making at the point of customer contact and strengthen
partnerships with states, local governments, commuter agencies and freight
railroads. In addition to the strategic business units, a centralized corporate
organization includes finance, planning, law, labor relations, human resources,
mechanical, safety, environmental, marketing, diversity, government affairs,
procurement and equipment and crew scheduling and dispatch departments.
Currently, Amtrak is in the process of restructuring its operations and
management organization with the goals of centralizing some functions,
streamlining its management structure and reducing costs.
32
P-->

Amtrak has four subsidiaries:
Passenger Railroad Insurance, Limited, a Bermuda company, is a wholly owned
subsidiary of Amtrak that provides insurance coverage to Amtrak and reinsures
that coverage through commercial reinsurance markets.
Chicago Union Station Company, an Illinois corporation, is a wholly owned
subsidiary of Amtrak. Its primary assets are the Chicago Union Station and
various nearby real estate parcels. It has no employees; all of its directors
and officers are Amtrak employees.
Washington Terminal Company is a District of Columbia corporation,
approximately 99.7% owned by Amtrak. The remainder is owned by officers and
directors of Washington Terminal Company. Its primary assets are various parcels
around Washington Union Station but Washington Terminal Company does not own the
station, which is owned by the United States of America. Washington Terminal
Company has no employees; all of its officers and a majority of its directors
are Amtrak employees.
Amtrak owns a 99% interest in 30th Street Limited, L.P., a Delaware limited
partnership, which Amtrak formed in 1987 with the Philadelphia Authority for
Industrial Development for the purpose of rehabilitating, leasing and operating
the 30th Street Station in Philadelphia. Amtrak owns the 30th Street Station.
Amtrak is also the sole member of the borrower under the mortgage loan,
which is a special-purpose entity created solely for the purpose of holding the
mortgaged property.
Amtrak also owns Baltimore Penn Station, New York Penn Station and
Providence Station.
Amtrak's national network provided service in Fiscal Year 2001 to more than
23 million intercity passengers. Its active fleet of approximately 400
locomotives and 1,500 passenger cars stops at over 500 stations in 46 states.
Amtrak operates over 260 daily intercity trains and manages the operation of
seven commuter rail systems across the country, supporting an additional
63 million annual riders.
Amtrak's trains operate over a nationwide system of approximately 23,000
route miles. With the exception of the Northeast Corridor, where Amtrak owns
over 700 miles of trackage from Washington, D.C. to New York City and from New
Haven to the Massachusetts/Rhode Island border, most of the tracks Amtrak uses
are owned by freight railroads. Amtrak uses this trackage under contracts with
freight railroads. Under the Rail Passenger Service Act, if Amtrak is unable to
obtain contractual rights to use the trackage, the Surface Transportation Board
is authorized to grant access rights to Amtrak for use of the trackage and to
establish the amounts payable by Amtrak for those rights, which would be based
upon the incremental costs related to Amtrak's use and the quality of service
Amtrak receives.
DESCRIPTION OF CAPITALIZATIONPREFERRED AND COMMON STOCK
Amtrak has issued both common and preferred stock.
As of September 30, 2001, 109,396,994 shares of $100 par value preferred
stock were authorized, all of which were issued and outstanding. All issued
preferred shares are held by the Secretary of Transportation for the benefit of
the federal government as consideration for grants made by the federal
government to Amtrak for Fiscal Years 1971 through 1998. The Amtrak Reform Act
prohibited Amtrak from issuing additional preferred stock in exchange for
federal grants received by Amtrak.
As of September 30, 2001, 10,000,000 shares of $10 par value common stock
were authorized, of which approximately 9,385,694 shares were issued and
outstanding. The Amtrak Reform Act requires that Amtrak redeem at fair market
value the shares of common stock outstanding as of December 2,
33
P-->

1997, by the end of Fiscal Year 2002. As of December 2, 1997, 9,385,693.8 shares
of $10 par value common stock were issued and outstanding. The common stock is
owned by the following entities:
[Download Table]
American Financial Group -- 5,238,210.9 shares
(successor to Penn Central)
Burlington Northern Santa Fe -- 3,344,719.1 shares
Canadian National (Grand Trunk) -- 594,307.4 shares
Canadian Pacific (Soo Line) -- 208,456.4 shares
Amtrak has held meetings with the owners of its common stock to discuss the
redemption of their shares, and in an effort to comply with the Amtrak Reform
Act, Amtrak has made an offer to redeem the stock for cash at a price of $0.03
per share. Amtrak does not believe that the stock has value. Counsel for the
four common stockholders has rejected Amtrak's offer as inadequate. There has
been no resolution of this matter between Amtrak and the owners. Amtrak is
considering various courses of action. See "Risk Factors--Risks Relating toAmtrak--Other Business Risks."LONG-TERM INDEBTEDNESS AND CAPITAL LEASES
In exchange for financing acquisitions of and improvements to property and
equipment, Amtrak issued two promissory notes to the United States, in 1976 and
1983. The first note with a balance of $4.0 billion matures on December 31, 2975
and is secured by a substantial portion of Amtrak's real property. The second
note with a balance of $1.1 billion matures on November 1, 2082, with successive
99-year renewal terms, and is secured by Amtrak rolling stock. Neither of the
notes bears interest, unless prepaid or accelerated. Amtrak's obligations to the
federal government under the 1976 note, which are secured by liens on some of
Amtrak's real property, may be accelerated by enactment of federal law requiring
the 1976 note to be repaid. The amount due under the 1976 note is limited to the
fair market value of the security. The federal government's security interest in
Amtrak's rolling stock under the 1983 note entitles it to repayment plus
interest in the event Amtrak ceases operations, is acquired by another entity,
or seeks relief under bankruptcy or insolvency laws. The federal government's
lien in respect of rolling stock has been subordinated in connection with
transactions where a security interest in the rolling stock is taken by third
parties and has been terminated in respect of capital lease transactions.
The portion of Penn Station that secures the mortgage loan is subject to the
lien referred to above. Amtrak has obtained an agreement executed by the Federal
Railroad Administration that subordinates the lien referred to above on the
mortgaged property to the lien created by the mortgage in favor of the
Depositor. See "Description of the Mortgage Loan."
Amtrak typically finances rolling stock and other equipment procurement with
secured loans or capital leases. For capital assets procured through loans or
capital leases, Amtrak treats principal payments as capital costs and interest
payments as operating expenses. As of December 31, 2001, Amtrak's lease
financing and debt obligations relating to rolling stock and other equipment
totaled approximately $3.3 billion, with the total amount of assets recorded
under lease financings approximating $3.1 billion, and the total amount of
long-term debt approximating $0.2 billion, including loans for rolling stock and
related maintenance facilities, a parking facility in Chicago and the 30th
Street Station in Philadelphia. Total long-term debt and capital lease
obligations associated with equipment and facilities increased in Fiscal Years
2000 and 2001 and in the first quarter of Fiscal Year 2002 by 57.3%, 12.1% and
approximately 5%, respectively, due to equipment purchases and investments in
high-speed trainsets and maintenance facilities and refinancing of existing
rolling stock.
34
P-->

In December 1993, Amtrak acquired a parking facility located in Chicago in
exchange for a $20 million promissory note bearing a fixed rate of interest and
due in full in December 2003. Amtrak gave the seller a security interest in the
facility as well as an irrevocable unconditional $4 million letter of credit as
collateral.
In December 2000, Amtrak acquired land and office facilities located in
Connecticut in exchange for cash and a $2,750,000 mortgage note bearing a fixed
rate of interest. Monthly principal and interest payments are due through
December 2003. The December 31, 2001 outstanding balance of $1,914,190 is
secured by the land and office facilities.
30th Street Limited, L.P. was established in 1987 to facilitate financing of
the reconstruction of the 30th Street Station in Philadelphia, Pennsylvania. As
of December 31, 2001, $30 million of the Philadelphia Authority for Industrial
Development bonds issued to finance a portion of the costs of the reconstruction
of the 30th Street Station remained outstanding. These bonds were issued on
December 30, 1987, mature on January 1, 2011, and bear interest at a fixed or
variable rate as stipulated in the bond indenture. Interest is payable until
maturity at intervals determined under provisions in the bond indenture. No
amortization of bond principal prior to maturity is required, although Amtrak is
required to make annual deposits into a sinking fund to be used to pay off the
bonds when they mature. As of December 31, 2001, Amtrak's aggregate deposits
into the fund were $8,800,000. Since the bonds are subject to optional tender by
the bondholders in some circumstances, 30th Street Limited, L.P. has executed a
liquidity facility which provides funds to purchase the bonds tendered under the
optional tender provisions.
30th Street Limited, L.P. also has an obligation to the City of
Philadelphia, Pennsylvania under an Urban Development Action Grant loan
agreement, which at December 31, 2001 equaled approximately $11,837,000.
Principal is being repaid in $130,000 annual installments each November 29th
through 2011 with the balance due on November 29, 2012. 30th Street Limited,
L.P.'s obligations under the Urban Development Action Grant loan agreement are
secured by a leasehold mortgage on the 30th Street Station in Philadelphia. The
Urban Development Action Grant loan bears no interest.
In December 1997, Amtrak financed the construction of three maintenance
facilities for the Acela high-speed trainsets to be located at Amtrak's Ivy City
(Washington, DC), Sunnyside (New York, New York), and Southampton (Boston,
Massachusetts) maintenance yards, and granted the lenders a mortgage and
security interest in the maintenance facilities. Subsequently, Amtrak made
additional improvements related to the maintenance facilities, such as railroad
track, catenary and signaling equipment related to the track, and related
assets. In October 2001, Amtrak restructured the transaction to a tax-advantaged
defeased sale and leaseback lease financing including the maintenance facilities
and some of the additional related improvements, all of which consequently were
subject to a mortgage and security interest. The restructuring did not
materially affect debt service paid by Amtrak under the financing and generated
an upfront cash benefit of approximately $20 million to Amtrak.
In September 1999, Amtrak entered into a loan agreement to fund construction
costs of the Richmond frequency converter in Philadelphia, Pennsylvania, a
facility used to convert the frequency of electric power to be distributed by
Amtrak to passenger rail systems. The net proceeds of the $110,795,000
tax-exempt bond issue, Series A of 2001, by the Pennsylvania Economic
Development Financing Authority, which closed in February 2001, were applied,
among other things, to refinance the construction loan. The net proceeds of the
$45,000,000 tax-exempt bond issue, Series B of 2001, by the Pennsylvania
Economic Development Financing Authority, which closed in April 2001, were
applied, among other things, to pay a portion of the balance of the costs of
constructing the facility. The total net proceeds of approximately $155 million
are reflected by Amtrak in its financial statements as a lease financing
obligation.
Amtrak refinanced existing rolling stock through defeased sale-leaseback
financings which closed in December 1999 in the amount of $384.8 million, in
June 2000 in the amount of $150.8 million and in
35
P-->

August 2000 in the amount of $393 million. Amtrak procured the last of the eight
multicar trainsets for operation between Los Angeles and San Diego in the spring
of 2001. The costs of these trainsets are being funded through secured direct
vendor financing in the amount of approximately $106 million. Amtrak executed
long-term leveraged lease financing of these trainsets in Fiscal Year 2000 and
in Fiscal Year 2001. Also, in September 2000, Amtrak entered into defeased
cross-border leases for high-speed rail locomotives and trainsets, and through
December 31, 2001, Amtrak has entered into long-term domestic leveraged leases
of fifteen high-speed locomotives and fifteen high-speed trainsets.
In the summer of 2000, Amtrak entered into a contract with General Electric
Company for the procurement of 85 locomotives. As of December 31, 2001, Amtrak
has financed all of these locomotives with a long-term leveraged lease at fair
market value estimated to be approximately $221 million.
In October 2000, April 2001 and September 2001, Amtrak closed the sale and
leaseback of sixteen rebuilt AEM-7 locomotives in the amount of $64 million.
These fundings are a series of sale and leasebacks or secured loans financing
the rebuilding of 30 AEM-7 locomotives, expected to be completed during calendar
year 2002.
In May 2001, The Northwestern Mutual Life Insurance Company loaned to CUSCO
NO. 1 LLC, a single purpose limited liability company the sole member of which
is Chicago Union Station Company, a wholly owned subsidiary of Amtrak,
$7,000,000 secured by CUSCO NO. 1 LLC's property interests in the 300 South
Riverside Building, Chicago, Illinois, and $14,500,000 secured by CUSCO NO. 1
LLC's property interests in the 100 North Riverside Building, Chicago, Illinois.
The loans are cross-collateralized and cross-defaulted. Quarterly interest
payments are due on each mortgage note through June 2011. The December 31, 2001
total outstanding balance on these loans was $21,338,850.
Amtrak expects that it will continue to enter into loan agreements, leases
and other arrangements to fund its major capital expenditures. Amtrak estimates
that the principal due annually for those arrangements will be approximately
$79 million in Fiscal Year 2002, increasing to approximately $137 million by
Fiscal Year 2005.
Amtrak currently pays principal on most of its indebtedness and capital
leases from federal capital appropriations and interest from its operating
revenues and expects to continue to do so indefinitely into the future. See
"Risk Factors--Risks Relating to Amtrak--Risks Regarding Funding for CapitalExpenditures."INTERIM FINANCINGS, UNSECURED CREDIT FACILITIES AND OPERATING LEASES
Under separate financing arrangements entered into in December 1997 and
August 1998, Amtrak may borrow up to $870 million toward the construction and
acquisition of Acela Express high-speed rail locomotives and trainsets and three
related maintenance facilities. As of December 31, 2001, remaining outstanding
advances due under these arrangements totaled approximately $48.1 million. Final
delivery of all locomotives occurred in December 2001. Final delivery of the
trainsets is expected by the spring of 2002. Amtrak consummated long-term
leveraged lease financings of high-speed locomotives and trainsets during Fiscal
Year 2001, totaling approximately $589 million. In October 2001, the three
completed maintenance facilities and ancillary property were subjected to a
long-term leveraged lease financing totaling approximately $226 million.
In 1998, Amtrak entered into loan agreements to fund the overhaul and
refurbishment of 30 AEM-7 locomotives, which are secured by the locomotives. The
outstanding balance due under the agreements as of December 31, 2001 was
$16.1 million, and the balance is to be paid in full in April 2002. In
July 1999, Amtrak secured commitments to refinance $85 million of the costs of
21 of these locomotives through long-term lease arrangements. The first closings
under these arrangements occurred in October 2000.
36
P-->

Amtrak has a $270 million unsecured revolving credit facility with a
consortium of banks led by Credit Lyonnais New York Branch which expires on
November 15, 2002. Borrowings under this revolving credit facility bear interest
based on the Eurodollar rate, prime rate or federal funds rate. Amtrak pays
various fees on these credit lines. As of December 31, 2001, Amtrak had no
outstanding borrowings under the credit facility, but had used approximately
$10.1 million for purposes of securing its obligations under letters of credit.
Pursuant to the terms of this credit facility, Amtrak will be in default if it
files a plan for its own liquidation with Congress that the lenders determine is
reasonably likely to have a material adverse effect on Amtrak's ability to make
payments when due under the credit facility, or if the lenders determine that
the Reform Council finding itself is reasonably likely to have this type of
material adverse effect. No determination of this kind has yet been made by the
lenders.
In addition to the capital lease obligations, long-term debt and unsecured
revolving credit facility, as of December 31, 2001, Amtrak was obligated under
operating leases for minimum rental payments equaling approximately
$201 million over the terms of the leases, principally for station and office
spaces. These operating leases have initial or remaining non-cancelable terms in
excess of one year.
CAPITAL INVESTMENT PROGRAM
Amtrak's capital investment program for Fiscal Year 1999 provided for
$1.41 billion for capital investments of which $808 million was provided by the
federal government, $303 million by states and $300 million by institutional
lenders and other sources. Amtrak's capital investment program for Fiscal Year
2000 provided for capital investments of $1.685 billion, of which $759 million
was provided by the federal government, $220 million by states and local
sources, $86 million by internally generated funds and $620 million by
institutional lenders and other sources. Amtrak's capital investment program for
Fiscal Year 2001 provided for capital investments of $881 million, of which
approximately $464 million was provided by the federal government, $12 million
by internally generated funds, $48 million by states and local sources and
$357 million by lenders and other sources. Amtrak's capital investment program
for Fiscal Year 2002 provides for capital investments of $693 million, of which
approximately $625 million was provided by the federal government, $33 million
by states and local sources and $35 million by lenders and other sources. See
"--Financial Information--Summary of Financial Information."
The following summarizes Amtrak's most significant recent capital
investments:
HIGH-SPEED RAIL: Investments of over $2.1 billion have already been made
towards the design and construction of the electrified catenary and power
generation system between New Haven and Boston, completion of other related
infrastructure projects and procurement of high-speed trainsets, locomotives and
maintenance facilities for the new Acela service.
The first stage of the Northeast Corridor high-speed rail program featuring
electrified service from Boston to New York, referred to as Acela Regional, was
initiated on January 31, 2000. As of December 31, 2001, Amtrak had accepted
delivery of fifteen high-speed trainsets and fifteen locomotives to be used in
Acela service. The Acela Express service commenced in December 2000. Amtrak
expects that its Acela Express service, providing high-speed rail service
between Boston and Washington, D.C., will be fully operational by the spring of
2002. See "Risk Factors--Risk Relating to Amtrak--Other Business Risks."
ROLLING STOCK BETTERMENT: In addition to high-speed rail equipment
described in the preceding paragraph, Amtrak has undertaken significant capital
investment with an aggregate value of approximately $500 million to improve its
passenger car fleet, its locomotives and mail and express delivery service
business capacity. In 1998, Amtrak contracted for 40 new Surfliner passenger
cars for its Los Angeles to San Diego corridor service. Delivery of these cars
has been completed. In 1998, Amtrak contracted for the repowering and
refurbishment of 30 AEM-7 locomotives. The first of these
37
P-->

rebuilt locomotives commenced commercial operations in Fiscal Year 2000 and all
should be in service by the end of calendar year 2002. In the summer of 2000,
Amtrak contracted for the acquisition of 85 new General Electric locomotives,
all of which have been delivered. Since 1998, Amtrak also has contracted for the
procurement of rolling stock intended to support the mail and express delivery
service, including roadrailer equipment and boxcars. Additional investment in
mail and express delivery service equipment and related infrastructure is
expected.
CORRIDOR DEVELOPMENT: Over the longer term, a key strategy in Amtrak's
investment program is the development of high-speed corridors designated by the
United States Department of Transportation, or "DOT," under the auspices of the
InterModal Surface Transportation and Efficiency Act of 1991. The Northeast
Corridor between Boston and Washington, D.C. is one of these corridors.
Amtrak's success is contingent upon continued support for Amtrak's capital
investment and availability of capital from the federal government from state
and local sources and from private parties through debt issuance and capital
lease arrangements. Amtrak assumes that this support will continue to be
available and will enable Amtrak to make investments in support of its business
plans. However, if the cash received from federal capital grants is not
significantly increased beginning in Fiscal Year 2002, Amtrak believes that it
will be required to restructure the scope of its operations. See "RiskFactors--Risks Relating to Amtrak--Risks Regarding Funding for CapitalExpenditures."
A number of entities which are responsible for overseeing Amtrak's
operations have raised concerns about Amtrak's ability to fund its capital
needs. The report issued on May 31, 2000 by the GAO entitled "Intercity
Passenger Rail: Amtrak Will Continue to Have Difficulty Controlling Its Costs
and Meeting Capital Needs," known as the "GAO Cost Report," estimates that
Amtrak's short- and long-term identified capital investment needs total
approximately $9.1 billion through 2015, with over $4 billion in short-term
capital investment needed through 2004, and states that Amtrak's identified
capital investment needs are expected to exceed available federal capital funds
by nearly $2 billion over the next five years. Additionally, in a report issued
on September 19, 2000 by the DOT IG entitled "2000 Assessment of Amtrak's
Financial Performance and Requirements," or the "DOT IG Assessment," the DOT IG
stated that "Amtrak's capital outlook is grave." The DOT IG concluded that,
based on estimates prepared by the DOT IG which restated Amtrak's goals set
forth in Amtrak's original business plan and the Fiscal Year 2000 business plan,
without corrective action, Amtrak would not have enough capital funds to cover
its debt payments and other mandatory capital costs. If capital funds were ever
insufficient to cover its debt payments, Amtrak would expect to use operating
revenues to cover those payments. The DOT IG, in testimony before the
Subcommittee on Transportation and Related Agencies, Committee on Appropriations
on March 21, 2001, stated that Amtrak's overall financial results have not
improved significantly since 1999. Amtrak has reviewed the DOT IG Assessment and
has addressed a number of the concerns raised by the DOT IG, which were
reflected in the Fiscal Year 2001 business plan. See "Risk Factors--RisksRelating to Amtrak--Risks Regarding Funding for Capital Expenditures."FINANCIAL INFORMATIONSUMMARY OF HISTORICAL FEDERAL AND STATE FINANCIAL ASSISTANCE
From 1971 through December 2001, the federal government provided Amtrak with
approximately $24 billion in financial assistance of which approximately
$11.0 billion was used for Amtrak's capital investment with the remainder used
for Amtrak's operating expenses. The Taxpayer Relief Act provided Amtrak with
approximately $2.2 billion in funds to be used for qualified expenditures as
defined in the Taxpayer Relief Act. In addition, Congress appropriated
$609 million, $571 million and $521 million, respectively, for Amtrak's capital
expenditures for Fiscal Years 1999, 2000 and 2001.
Although the Amtrak Reform Act permits Amtrak to receive operating grants in
Fiscal Years 1998 through 2002 and thereafter for statutorily-permitted
liabilities, Congress began in Fiscal Year 1999 to
38
P-->

appropriate only capital grants for Amtrak, and no operating grants were
appropriated. However, to date, Congress has permitted Amtrak to utilize federal
capital funding for progressive overhaul expenses and other maintenance expenses
that would be characterized as operating expenses under generally accepted
accounting principles, or "GAAP." See "--Summary of Financial Information."
Amtrak has also received funding throughout much of its history from various
states to support, among other things, passenger rail service within or between
states, as well as acquisition and rehabilitation of equipment and construction
of and improvements to rail infrastructure and train stations. State funding for
Amtrak's operating expenditures has increased significantly in the last seven
years, from approximately $33 million in Fiscal Year 1994 to approximately
$123 million in Fiscal Year 2001. During this seven-year period, Amtrak received
a total of $586 million in state operating subsidies, with California, Illinois,
Wisconsin, Washington and Missouri contributing the largest portion of state
subsidies. Funding for operating expenditures is in addition to funding by
states for capital expenditures that are paid to Amtrak or benefit Amtrak's
projects.
The DOT IG has stated that Amtrak's capital investment needs are expected to
exceed available federal capital funds by nearly $2 billion over the next five
years. This undercapitalization will require Amtrak to depend increasingly on
nonfederal sources of funds, such as funding from states and increased
borrowings, to obtain capital. However, the DOT IG Assessment states that the
undercapitalization may hinder Amtrak's ability to obtain state funding for
jointly-developed capital projects, particularly if the states require Amtrak to
fund a portion of the capital costs of these projects, which could result in
cancellation or postponement of the projects. See "--Description ofCapitalization" and "Risk Factors--Risks Relating to Amtrak--Risks RegardingFunding for Capital Expenditures."
The table below summarizes historical federal and state financial assistance
to Amtrak for Fiscal Years 1995 through 2001. Amtrak expects to require
continued funding for capital expenditures from the federal government and
increased funding from various states for its capital and operating expenditures
in the foreseeable future, with Amtrak estimating operating revenues from states
of approximately $132 million in Fiscal Year 2002. See "--Description ofCapitalization--Capital Investment Programs,""Risk Factors--Risks Relating toAmtrak--Risks Regarding Funding for Capital Expenditures" and "RiskFactors--Risks Relating to Amtrak--Legal And Regulatory Risks of Amtrak--SpecialNote Regarding Forward-Looking Statements."
39
P-->

SUMMARY OF FINANCIAL INFORMATION
The table set forth below summarizes Amtrak's financial performance and
budget results for Fiscal Years 2001, 2000 and 1999 on an adjusted, non-GAAP
basis, and is derived from the unaudited financial statements of Amtrak.
COMPARISON OF FINANCIAL PERFORMANCE AND BUDGET RESULTSFOR FISCAL YEARS 1999, 2000 AND 2001($ IN MILLIONS; ANY DISCREPANCY IS DUE TO ROUNDING)
[Enlarge/Download Table]
FISCAL YEAR FISCAL YEAR FISCAL YEAR
1999 2000 2001
----------- ----------- -----------
GAAP Revenue(1)............................................ $2,010.9 $2,110.8 $ 2,144.3
Adjustment(2).............................................. (267.8) (179.5) (103.3)
-------- -------- ---------
Adjusted Revenue(2)........................................ $1,743.1 $1,931.3 $ 2,041.0
GAAP Expense(1)............................................ $2,659.7 $2,875.3 $ 3,113.6
-------- -------- ---------
Operating Profit (Loss).................................... $ (916.6)(3) $ (944.0) $(1,072.6)
======== ======== =========
Capital for Maintenance(4)................................. $ 484.0 $ 361.7 $ 242.2
Capital Contribution to Operating(4)....................... 103.4(3) 90.5 61.2
Net Operating Profit (Loss)................................ $ (329.2) $ (491.8) $ (769.2)
Depreciation and Other Non-Cash(4) 337.2 382.3 487.5
Budget Result.............................................. $ 8.0 $ (109.5) $ (281.7)
======== ======== =========
------------------------
1 For Fiscal Years 1999 and 2000, interest income has been reclassified as an
offset to interest expense.
2 Adjustment consists of the exclusion of Taxpayer Relief Act revenues,
related interest income and state capital funds of $214.4, $176.0 and
$23.6 million for Fiscal Years 1999, 2000 and 2001, respectively. Includes
net interest expense of $53.4, $54.2, and $79.7 million for Fiscal Years
1999, 2000 and 2001, respectively. Fiscal Year 2000 also includes a
$50.7 million reduction to operating loss associated with accounting
principle changes.
3 Included in the actual "Capital Contribution to Operating" as other expenses
for Fiscal Year 1999, and not in the original business plan, are Year 2000
technology compliance expenses in the amount of $10.6 million.
4 Capital for maintenance, capital contribution to operating, depreciation and
other non-cash expenses are included as expenses, because they are
considered operating expenses under GAAP. However, under Amtrak's accounting
methodology, these expenses are funded from federal capital appropriations
and hence added back to the operating profit/(loss) to calculate the budget
result.
For Fiscal Year 2001 Amtrak's actual budget result was approximately
$162.9 million below the estimate established in the Fiscal Year 2001 business
plan. The Fiscal Year 2001 business plan had targeted a budget result equal to a
loss of $118.8 million
Excluding all state capital payments, as well as Taxpayer Relief Act
payments and related investment income, the operating result in Fiscal Year 2001
was a net loss of $1,072.6 million compared to a Fiscal Year 2000 net loss of
$944.0 million.
Total Amtrak revenues on a GAAP basis in Fiscal Year 2001 increased to
approximately $2,144.3 million, which was approximately 1.6%, or $33.5 million,
above total revenues for Fiscal Year 2000. Amtrak's revenues for Fiscal Year
2001, after adjustment for Taxpayer Relief Act payments and
41
P-->

state capital payments, increased by approximately 6.2% over adjusted revenues
for Fiscal Year 2000. State operating contribution revenue grew 10.4% to
$123.1 million in Fiscal Year 2001 compared to $111.5 million in 2000. The total
revenue variance reflected a 7.0% growth in ticket yield led by increases in
Northeast Corridor of 6.4% and Amtrak Intercity of 4.7%. Passenger rail
operations continued improvement in ridership, a 4.3% increase over Fiscal Year
2000.
Total expenses grew from $2,875.3 million in Fiscal Year 2000 to
approximately $3,113.6 million in Fiscal Year 2001, a growth of approximately
$238.3 million or 8.3% for the year. Of that growth, approximately
$61.7 million was for labor-related expenses with labor accounting for
approximately 52% and 54% of total expenses in Fiscal Year 2001 and 2000,
respectively. Benefits, about 31% of all labor costs, grew at a rate of 5.1%.
Train operations, approximately 7.3% of total costs, grew at a 5.4% rate over
the previous fiscal year. Fuel, power, and utilities, accounting for
approximately 6.1% of all operating expenses, grew at a 15.1% rate due to power
purchased for high-speed rail in the Northeast Corridor. Depreciation and other
non-cash expenses grew by $105.2 million, or approximately 27.5%, reflecting the
purchase and depreciation of additional capital equipment. Excluding investment
income from Taxpayer Relief Act funds, interest income almost doubled to
$79.6 million in Fiscal Year 2001 compared to $41.2 million in 2000. Interest
expense increased by 50.8% to $162.1 million in Fiscal Year 2001 from
$107.5 million in 2000. These interest income and expense increases relate
primarily to the sale and leaseback transactions discussed above, under which
Amtrak has leased back passenger cars and other equipment under capital leases.
For Fiscal Year 2000, Amtrak's actual budget result was approximately
$109.5 million below the estimates established in the Fiscal Year 2000 business
plan. The Fiscal Year 2000 business plan had targeted a budget result equal to a
loss of $100,000. Revenue loss, consisting of the following three components,
can be attributed entirely to the delay of Acela Express trainsets:
(a) approximately $100 million in lost ticket revenues; (b) approximately
$44 million in lost revenue from lease-back arrangements for the trainsets; and
(c) approximately $40 million from the absence of liquidated damages due to the
delay. However, the performance of Acela Regional and various non-transportation
activities partially offset the loss or delay of revenues.
Excluding all state capital payments, as well as Taxpayer Relief Act
payments and related investment income, the operating result in Fiscal Year 2000
was a net loss of $944.0 million compared to a Fiscal Year 1999 net loss of
$916.6 million.
Total Amtrak revenues on a GAAP basis in Fiscal Year 2000 increased to
approximately $2,110.8 million, which was approximately 5.0%, or $99.9 million,
above total revenues for Fiscal Year 1999. Amtrak's revenues for Fiscal Year
2000, after adjustment for Taxpayer Relief Act payments and state operating
capital payments, increased by approximately 9.8% over adjusted revenues for
Fiscal Year 1999. State operating contribution revenue grew 11.6% to
$111.5 million in Fiscal Year 2000 compared to $99.9 million in 1999. The total
revenue variance reflected a 7.4% growth in ticket yield led by increases in
Northeast Corridor of 13.5% and Amtrak West of 10.9%, as well as continued
growth in Amtrak's mail and express delivery service of 24.8%. Passenger rail
operations continued improvement in ridership, a 4.7% increase over Fiscal Year
1999. Between February 2000 and September 2000, Acela Regional service in the
Northeast Corridor generated $26.6 million in ticket revenue. Revenue estimates
had assumed that $17.7 million would be generated by Acela Regional based on
actual revenues of $14.9 million in the prior year. This represents a 45% growth
in ridership and a 77% growth in ticket revenues. Actual revenues in Fiscal Year
2000 were $72.1 million lower than revenues estimated in the Fiscal Year 2000
business plan due to the delay in implementation of high-speed service. With no
high-speed service implemented in Fiscal Year 2000 and only two Acela Regional
trains in operation beginning in January 2000, estimated ticket revenues fell
short by over $150 million in Fiscal Year 2000.
42
P-->

Total expenses grew from $2,659.7 million in Fiscal Year 1999 to
approximately $2,875.3 million in Fiscal Year 2000, a growth of approximately
$215.6 million or 8.1% for the year. Of that growth, approximately
$106.6 million was for labor-related expenses with labor accounting for
approximately 54% of total expenses in each year. Benefits, about 31% of all
labor costs, grew at a rate of 7.3%. Train operations, approximately 7.5% of
total costs, grew at a 11.5% rate over the previous fiscal year primarily due to
increased passenger and mail and express operations. Depreciation and other
non-cash expenses grew by $45.1 million, or approximately 13.4%, reflecting the
purchase and depreciation of additional capital equipment. Excluding investment
income from Taxpayer Relief Act funds, interest income increased by over sixfold
to $41.2 million in Fiscal Year 2000 compared to $6.4 million in 1999. Interest
expense increased by 29.7% to $107.5 million in Fiscal Year 2000 from
$82.9 million in 1999. This increase relates to the sale and leaseback
transactions discussed above, under which Amtrak has leased back passenger cars
and other equipment under capital leases.
In Fiscal Year 2000, Amtrak changed its methods of accounting for state and
state agency capital contributions, and start-up costs. Historically, capital
contributions received from states or state agencies were recorded as other
paid-in capital. Effective October 1, 1999, Amtrak defers and subsequently
amortizes state capital contributions received into revenue over the life of the
related asset. This change resulted in a $51.8 million cumulative gain
associated with prior years. The effect of this change in Fiscal Year 2000 was
an $11.2 million increase to operating revenue. Prior to Fiscal Year 2000,
Amtrak capitalized project start-up costs. Effective October 1, 1999, Amtrak
expenses start-up costs as incurred. This change resulted in a $1.1 million
cumulative charge associated with prior years.
Starting in Fiscal Year 1999, interest income has been reclassified as an
offset to interest expense.
43
P-->

DESCRIPTION OF THE CERTIFICATES
The following is a summary of the principal provisions of the certificates.
This summary does not purport to be complete and you should refer to the actual
certificates for further information. Copies of the certificates can be obtained
from us.
GENERAL
The certificates were issued pursuant to the Trust Agreement and consist of
a single class, designated as the Class A Certificates. The certificates
represent in the aggregate the entire beneficial ownership interest in the
issuer, the assets of which, or the "TRUST FUND", consist of: (a) the mortgage
loan, the Mortgage Note, the Mortgage, and the related Mortgage Loan Documents,
and all payments under the mortgage loan and the Mortgage Loan Documents, and
(b) funds or assets from time to time on deposit in the Certificate Account and
the security interest in the Reserve Account.
DISTRIBUTIONS ON THE CERTIFICATES.
The certificateholders are entitled to receive as distributions all cash
flow on the mortgage loan and any other assets in the Trust Fund during the
related Collection Period (as described below), whether as interest, principal
or otherwise, other than amounts payable to the trustee pursuant to the Trust
Agreement and any other amounts that are payable or reimbursable to any person
other than the certificateholders pursuant to the Trust Agreement. These other
amounts generally include: (a) reimbursements and indemnification payments to
the trustee and related persons described under "Description of the TrustAgreement--the Trustee" and "--Indemnification;" (b) reimbursements and
indemnifications payable to us and persons related to us; (c) any federal, state
or local taxes imposed on the Trust Fund; and (d) any other costs, expenses and
liabilities that are required to be borne by the issuer or paid from the Trust
Fund in accordance with applicable law or the terms of the Trust Agreement. With
respect to any Distribution Date (as described below), the "COLLECTION PERIOD"
will be the period beginning on the immediately preceding Semi-Annual Payment
Date, or, in the case of the first Distribution Date, beginning on June 20,2001, and ending on the date before the Semi-Annual Payment Date in the month in
which that Distribution Date occurs.
METHOD, TIMING, AND AMOUNT. The distribution date for the certificates is
the 15th day of each December and June, or if the 15th is not a business day,
then the immediately succeeding business day (each, a "DISTRIBUTION DATE"),
commencing December 17, 2001. For purposes of the Trust Agreement, a "business
day" is a day other than a Saturday, a Sunday or a legal holiday on banking
institutions in the District of Columbia, the State of New York, or Utah are
authorized or obligated by law or executive order to be closed. The first
Distribution Date is in December 2001. Distributions will be made by wire
transfer of immediately available funds for the account of each
certificateholder, provided that the holder has provided the trustee with a
written request and appropriate wire instructions at least five business days
prior to the related record date, which is the close of business on the business
day immediately preceding a Distribution Date, and for every other holder, by
check mailed to the certificateholder. The final payment on any certificate will
be made only upon presentation and surrender of that certificate at the offices
of the trustee or its agent or the office or agency specified in the notice of
final distribution to holders of the certificates being retired. Distributions
on the certificates will be made on each Distribution Date to certificateholders
of record at the close of business on the related record date.
DEFEASANCE
The borrower may defease the mortgage loan at any time by depositing with
the holder of the mortgage loan a portfolio of Government Securities (as defined
in Section 2(a)(16) of the Investment Company Act of 1940) sufficient to make
all scheduled semi-annual payments on the mortgage loan and the remaining
principal balance of the mortgage loan at maturity.
44
P-->

CERTIFICATE REDEMPTION
MANDATORY REDEMPTION. Each certificate will be subject to mandatory
redemption in whole or in part at par prior to maturity in the event of a
principal payment, whether voluntary or involuntary, of the mortgage loan. If
the principal payment by the borrower that results in the redemption of
certificates is voluntary, then the certificateholders will be entitled to the
Make-Whole Premium payable in connection with that prepayment.
PRO RATA REDEMPTION. Whenever the certificates at any time outstanding are
to be redeemed in part and not in full, the certificates will be redeemed on a
pro rata basis based on the initial Fractional Undivided Interest of each
outstanding certificate.
NOTICE OF REDEMPTION. At least 5 days but not more than 30 days before a
redemption of the certificates, the trustee will mail or cause to be mailed, by
first class mail, a notice of redemption to all certificateholders at their
registered addresses.
For so long as the book-entry system through DTC is in effect with respect
to the certificates, the trustee will mail notices of redemption to DTC, its
nominee or its successors. Any failure of DTC to convey any notice to direct
participants, any failure of direct participants to convey any notice to any
indirect participants or any failure of any direct participant or indirect
participant to convey any notice to any beneficial owner will not affect the
validity of the redemption of the certificates called for redemption.
EFFECT OF NOTICE OF COMPLETE REDEMPTION OF ALL OUTSTANDING
CERTIFICATES. Once notice of redemption is mailed in accordance with the Trust
Agreement, certificates called for redemption become due and payable on the
Distribution Date on which the certificates are to be redeemed. On that
Distribution Date, the certificateholders will be entitled to the cash flow on
the mortgage loan and any other assets in the Trust Fund collected in connection
with the redemption.
VOTING RIGHTS
The certificates have voting rights for purposes of actions that may be
taken pursuant to the Trust Agreement. These voting rights are allocable among
the certificates in proportion to their respective Fractional Undivided
Interests from time to time. Any certificates owned by the borrower or an
affiliate of the borrower do not have any voting rights.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
In the event the trustee has actual knowledge of an Event of Default or any
default under the facility sublease, as promptly as practicable after, and in
any event within three business days after the trustee's actual knowledge of the
occurrence of any Event of Default or default, the trustee will provide notice
of default by facsimile to the mortgagor and the certificateholders.
Within a reasonable period of time after the end of each calendar year, the
trustee will prepare, or cause to be prepared, and the trustee will forward, or
cause to be forwarded, upon request, to each person who at any time during the
calendar year was the holder of a certificate, a statement setting forth the
aggregate amount of distributions for that calendar year or applicable portion
of that calendar year during which that person was a certificateholder.
Upon request of any certificateholder, the trustee will distribute to the
certificateholders written confirmation of the Specified Investments made by the
trustee during the fiscal quarter immediately preceding the request including
the type and amount of investments made and the earnings received from the
Specified Investments. To the extent required under the Trust Agreement, the
trustee will also make available to the certificateholders the following:
(a) any notice, report, request, demand certificate, statement, financial
statement or other instrument or communication received by the trustee
45
P-->

under and pursuant to the terms of the facility sublease or any Mortgage Loan
Document; (b) photocopies of any Mortgage Loan Document at the expense of the
trustee and (c) any other notices, reports or information required by the Trust
Agreement.
DELIVERY, FORM, TRANSFER AND EXCHANGEDENOMINATIONS
The certificates will be issued in Fractional Undivided Interests of not
less than 1% of the issuer.
BOOK-ENTRY CERTIFICATES
The certificates were initially issued in the form of a single permanent
global book-entry certificate in fully registered form without interest coupons
deposited with the trustee as custodian for DTC and registered in the name of a
nominee of DTC for credit to the respective accounts of the purchasers of the
certificates at DTC. Cede & Co. was DTC's original nominee. So long as DTC or
its nominee is the registered owner or holder of a book-entry certificate, DTC
or its nominee, as the case may be, will be considered the sole holder of the
book-entry certificate for all purposes under the Trust Agreement and the
certificates. DTC account holders will only be entitled to exercise rights with
respect to the book-entry certificates credited to their DTC accounts through
procedures established by DTC.
Distributions on the book-entry certificates will be made to DTC. DTC's
practice is to credit direct participants' accounts on the related distribution
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on that date.
Transfers between DTC participants will be effected in the ordinary manner in
accordance with DTC rules and will be settled in same-day funds. The laws of
some jurisdictions require that some holders take physical delivery of
securities in definitive form. Consequently, the ability to transfer beneficial
interests in a book-entry certificate to those persons may be limited. Because
DTC can only act on behalf of DTC participants, who in turn act on behalf of
indirect participants and banks, the ability of a person having a beneficial
interest in a book-entry certificate to pledge its interest to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of its interest, may be affected by the lack of a physical certificate
representing its interest. Transfers between direct account holders at Euroclear
and Clearstream Banking, or between persons or entities participating indirectly
in Euroclear or Clearstream Banking, will be effected in the ordinary manner in
accordance with their respective procedures and in accordance with DTC's rules.
Because of time-zone differences, credits of securities received in
Clearstream Banking or Euroclear, as DTC participants, as a result of a
transaction with another DTC participant will be made during subsequent
securities settlement processing and dated the business day following the DTC
settlement date. Credits or any transactions in securities settled during
processing will be reported to the relevant Euroclear participant or Clearstream
Banking customer on that business day. Cash received in Clearstream Banking or
Euroclear as a result of sales of securities by or through a Clearstream Banking
customer or a Euroclear participant to a DTC participant will be received with
value on the DTC settlement date but will be available in the relevant
Clearstream Banking or Euroclear cash account only as of the business day
following settlement in DTC.
DTC has advised us that DTC will take any action permitted to be taken by a
holder of a book-entry certificate only at the direction of one or more DTC
participants to whose DTC accounts interests in the book-entry certificates are
credited, and only in respect of the portion of the book-entry certificates as
to which each DTC participant has given its direction. Interests in book-entry
certificates exchanged for certificates in definitive form in accordance with
the Trust Agreement will be distributed to the relevant DTC participants.
46
P-->

To the extent that under the terms of the Trust Agreement, it is necessary
to determine whether any person is a certificateholder, the trustee will make
its determination based on a certificate of that person which must specify, in
reasonable detail satisfactory to the trustee, the Fractional Undivided Interest
of the book-entry certificate beneficially owned, the value of that person's
interest in the certificate and any intermediaries through which that person's
interest in the book-entry certificate is held; provided, however, that the
trustee is not to knowingly recognize that person as a certificateholder if the
person's certification that it is a certificateholder is in direct conflict with
information obtained by the trustee from DTC and/or the DTC participants with
respect to the identity of a certificateholder.
Although DTC, Euroclear and Clearstream Banking have implemented the
foregoing procedures in order to facilitate transfers of interests in the
book-entry certificates among participants of DTC, Euroclear and Clearstream
Banking, they are under no obligation to perform or continue to comply with
these procedures, and these procedures may be discontinued at any time. Neither
we nor the trustee will have any responsibility for the performance by DTC,
Euroclear or Clearstream Banking or their respective direct or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
DTC has advised us that DTC is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
United States Securities Exchange Act of 1934, as amended. DTC was created to
hold securities for DTC participants and facilitate the clearance and settlement
of securities transactions between DTC participants through electronic
book-entry changes in the accounts of DTC participants, thereby eliminating the
need for physical movement of certificates. DTC participants include securities
brokers and dealers, banks, trust companies and clearing corporations and may
include other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a DTC participant, whether directly or
indirectly.
The information in this prospectus concerning DTC, Euroclear and Clearstream
Banking has been obtained from sources believed to be reliable, but we take no
responsibility for its accuracy or completeness.
DEFINITIVE CERTIFICATES
Certificates initially issued in book-entry form will later be issued as
definitive certificates to applicable certificateholders or their nominees,
rather than to DTC or its nominee, only if: (a) we advise the trustee in writing
that DTC is no longer willing or able to properly discharge its responsibilities
as depository with respect to the certificates and we are unable to locate a
qualified successor or (b) we, at our option, elect to terminate the book-entry
system through DTC with respect to the certificates. Upon the occurrence of
either of the events described in the preceding sentence, the trustee will be
required to notify, in accordance with DTC's procedures, all DTC participants
through DTC of the availability of definitive certificates. Upon surrender by
DTC of the book-entry certificates, together with instructions for
re-registration, the trustee or other designated party will be required to issue
definitive certificates to the certificateholders identified in the
instructions, and the holders of the definitive certificates will then be
recognized as certificateholders under the Trust Agreement.
TRANSFER; EXCHANGE
Certificates held in fully registered, certificated form may be presented or
surrendered for registration of transfer or exchange at the offices of the
registrar. Every certificate presented or surrendered for transfer or exchange
will, if required by the registrar, be duly endorsed by, or be
47
P-->

accompanied by a written instrument in the form satisfactory to the registrar
duly executed by, the certificateholder or his attorney duly authorized in
writing. No service charge will be imposed for any transfer or exchange of
certificates, but the trustee or the registrar may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of certificates. The trustee will
initially serve as registrar.
Prior to due presentment for registration of transfer, we, the trustee, the
registrar and any agent of any of us may treat the person in whose name any
certificate is registered as the owner of the certificate for the purpose of
receiving distributions on that certificate and for all other purposes, and none
of us, the trustee, the registrar or any agent of any of us will be affected by
notice to the contrary.
As provided in the Trust Agreement, if (a) any mutilated certificate is
surrendered to the registrar, or the registrar receives evidence to its
satisfaction of the destruction, loss or theft of any certificate and (b) there
is delivered to the registrar security or indemnity as may be required by it to
save it harmless, then in the absence of actual notice to the registrar that the
certificate has been acquired by a bona fide purchaser, the registrar will
execute, authenticate and deliver, in exchange for or in lieu of any mutilated,
destroyed, lost or stolen certificate, a new certificate of like tenor and
interest in the Trust Fund. In connection with the issuance of any new
certificate, the registrar may require the payment of a sum sufficient to cover
any related expenses, including the fees and expenses of the registrar.
NOTICES
All references in this prospectus to notices, reports and statements to
certificateholders refer to notices, reports and statements to DTC or Cede &
Co., as the registered holder of the certificates, for distribution to the
related certificateholders through DTC's participants in accordance with DTC
procedures, and any notices, reports or statements will be deemed to be given on
the date on which they were sent. Until definitive certificates are issued in
respect to the certificates, the notices and other communications will be
available to the related certificateholders only to the extent they are
forwarded by, or otherwise available through, DTC and its participants or
otherwise made available publicly by the paying agent. The manner in which
notices and other communications are conveyed by DTC to its participants, and by
DTC participants to the certificateholders, will be governed by arrangements
among them, subject to any statutory or regulatory requirements in effect from
time to time. In respect of definitive certificates, any notice to the holders
of the definitive certificates will be validly given if published in a leading
daily newspaper printed in the English language and with general circulation in
London. Any notice shall be deemed to have been given on the date of publication
or, if published more than once or on different dates, on the first date on
which publication is made in this manner.
ERISA RESTRICTIONS
The certificates may not be transferred to some retirement plans and other
employee benefit plans and arrangements, including individual retirement
accounts, Keogh plans, collective investment funds, insurance company separate
accounts and some insurance company general accounts in which those plans,
accounts or arrangements are invested, referred to collectively as "Plans", or
any person who is directly or indirectly purchasing certificates or an interest
in the certificates on behalf of, as named fiduciary of, as trustee of, or with
assets of, any Plan, unless the purchase and holding of the certificates by the
transferee is exempt from the prohibited transaction provisions of Section 406
of ERISA and Section 4975 of the Code.
48
P-->

YIELD AND MATURITY CONSIDERATIONSGENERAL
The yield on any certificate will depend on (a) the price at which that
certificate is purchased by an investor and (b) the rate, timing and amount of
distributions on that certificate. The rate, timing and amount of distributions
on any certificate will in turn depend on, among other things, (1) the mortgage
rate for the mortgage loan, (2) the rate and timing of principal payments or
other collections on the mortgage loan, (3) the rate, timing and amount of
additional Trust Fund expenses, and (4) whether there are any delinquencies or
defaults on the mortgage loan and, if so, the timing of these delinquencies or
defaults and the severity of any resulting losses and the timing of any proceeds
of the liquidation of the mortgaged property. The borrower may voluntarily
prepay the mortgage loan in whole or in part in an amount equal to or greater
than $50 million, on any Semi-Annual Payment Date after May 31, 2006, subject to
the payment of the Make-Whole Premium. If a default occurs under the mortgage
loan prior to June 14, 2017 and the mortgaged property is foreclosed and sold,
any resulting payments of principal in respect of the mortgage loan would
shorten the weighted average lives of the certificates. On the other hand, a
default on the mortgage loan at or near June 14, 2017 may result in significant
delays in payments of principal on the mortgage loan, and, accordingly, on the
certificates, while a work-out is negotiated or foreclosures are completed, and
those delays would lengthen the weighted average lives of the certificates.
The extent to which the yield to maturity of the certificates may vary from
the anticipated yield will depend upon the degree to which the certificates are
purchased at a discount or premium and when payments are made in respect of
principal on the mortgage loan. You should consider, in the case of any
certificate purchased at a discount, the risk that a default on the mortgage
loan at or near maturity could result in an actual yield to you that is lower
than the anticipated yield and, in the case of any certificate purchased at a
premium, the risk that principal payments on the mortgage loan prior to maturity
could result in an actual yield to you that is lower than the anticipated yield.
In general, as to any certificate purchased at a discount or premium, the
earlier that a payment of principal on the mortgage loan is made, the greater
will be the effect on an investor's yield to maturity.
The aggregate amount of distributions on the certificates, the yield to
maturity of the certificates, the rate of payments on the certificates and the
weighted average life of the certificates will be affected by the timing of any
delinquency or default, and by the timing and magnitude of any loss, on the
mortgage loan. In general, the earlier a loss is borne by an investor, the
greater is the effect on that investor's yield to maturity.
Regardless of whether losses ultimately result, a delinquency or a default
on the mortgage loan may significantly delay the receipt of payments by the
holder of a certificate.
The yield to investors in the certificates will be adversely affected by any
shortfalls of interest collected on the mortgage loan. The yield to investors in
the certificates will also be adversely affected to the extent that the Trust
Fund incurs expenses that are not chargeable to the borrower as costs of
collection or otherwise or other unanticipated out-of-pocket expenses of the
trustee.
WEIGHTED AVERAGE LIFE
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of "principal" of the security will be
repaid to the investor. The "weighted average life" of a certificate is
determined by (a) multiplying the amount of each mortgage loan principal
distribution by the number of years from the date of issuance of the certificate
to the related Distribution Date, (b) adding the results and (c) dividing the
sum by the portion of the mortgage loan principal balance represented by that
certificate.
49
P-->

DESCRIPTION OF THE MORTGAGED PROPERTYGENERAL
The mortgage loan is secured by the borrower's leasehold interest in the
mortgaged property, a portion of the railroad transportation center located on
the west side of midtown Manhattan commonly known as "Penn Station" in the City
and State of New York. For purposes of this prospectus, the leased portion of
Penn Station is a portion of the public concourse areas, subject to rights of
some third parties, including passageways and retail stores, Amtrak signage,
ticket offices, information centers, vending areas, waiting rooms, washrooms and
similar areas, and office space lying beneath the buildings commonly known as
Two Penn Plaza and Madison Square Garden, New York, New York and is within the
area bounded on the east and west by 7th and 8th Avenues, and on the south and
north by 31st and 33rd Streets. The lien of the Mortgage also secures access to
and from the street, subways, railroad platforms and track levels via rights in
and use of elevators, escalators and stairways, but excluding the passenger/taxi
driveway and loading docks located on the street level. The lien of the Mortgage
does not encumber tracks and platforms under Penn Station or the Farley
Building, but Amtrak has covenanted in the prime lease and the facility sublease
not to pledge or encumber its interests in those tracks and platforms.
ENVIRONMENTAL REPORT
Penn Station has been the subject of Phase I environmental site assessments
and asbestos-containing material, or "ACM," surveys from time to time, the most
recent being a Phase I Environmental Site Assessment in April 2001, by ATC
Associates, Inc., covering those portions of Penn Station that are subject to
the prime lease, and an Asbestos Survey Recertification, dated October 1994, by
Hillmann Environmental Co., Inc. and partially updated in August 1998. The Phase
I identified environmental conditions which have impacted or might impact the
leased portions of Penn Station. These conditions included the possible presence
of PCBs in hydraulic and other equipment; the presence of ACM; and some issues
relating to the storage and management of chemicals and other regulated
substances. In addition, lead-based paint, present in many older buildings, is
likely to be present in Penn Station. The Hillmann ACM Reports included a
consideration of the presence of ACMs in Penn Station, exclusive of areas leased
to the Long Island Railroad. According to the Hillmann ACM Reports, ACMs remain
in areas of Penn Station, including in fireproofing, floor tiles and pipe
insulation. Amtrak believes that the conditions identified for the mortgaged
property in the Phase I and the presence of ACMs in Penn Station, so long as
they are properly managed, would not have a material adverse effect on the
borrower's business, assets or results of operations taken as a whole.
Nonetheless, there can be no assurance that the mortgaged property will not be
adversely affected by the presence of ACMs or other environmental conditions.
There can also be no assurances that all environmental conditions and risks
were identified or accurately quantified in the Phase I and Hillmann ACM
Reports. Investors should refer to the complete Phase I and Hillmann ACM
Reports.
ENGINEERING REPORTS
No assessment of the physical condition of Penn Station was conducted in
connection with the origination of the mortgage loan. However, assessments of
the physical condition of the portion of Penn Station leased to the borrower are
conducted from time to time by licensed engineers, which may be employees of
Amtrak. Those reports have generally concluded that the relevant portion of Penn
Station is in good physical condition.
EXISTING RETAIL AND OPERATING LEASES
The prime lease was made subject to existing retail lease agreements with
various retail establishments and leases with the Long Island Railroad and New
Jersey Transit, and therefore excludes the railroad operations of, and areas
leased to, the Long Island Railroad and New Jersey Transit.
50
P-->

DESCRIPTION OF THE PRIME LEASE
This is a summary of the principal provisions of the prime lease. This
summary does not purport to be complete, and you should refer to the Loan
Agreement, the Mortgage Note, the Mortgage and the other Mortgage Loan Documents
for more information. Copies of these documents may be obtained from us.
GENERAL
The mortgage loan is secured by the borrower's leasehold estate in a portion
of the improvements commonly known as Penn Station located in the City and State
of New York. Penn Station is owned by Amtrak. Amtrak leased that portion of Penn
Station to the borrower for a term of thirty-one years commencing on June 20,2001 in exchange for a single payment of rent on the date of commencement. The
prime lease was made subject to the existing retail space leases with retail
operators and leases with the Long Island Railroad and New Jersey Transit, and
therefore excludes railroad operations of, and areas leased to, the Long Island
Railroad and New Jersey Transit, already in existence.
PARTIES
The landlord under the prime lease is Amtrak, and the tenant is the
borrower.
TAXES
The landlord is fully exempt from the obligation to pay real property taxes
and the tenant receives the benefit from the landlord's exemption. However, if
taxes are levied against the portion of Penn Station leased to the tenant, the
tenant is obligated to pay those taxes.
OWNERSHIP OF IMPROVEMENTS
Penn Station is the property of the landlord.
REPAIRS
Under the prime lease, the tenant has agreed to keep the leased premises in
good condition and repair, as the leased premises had been maintained prior to
the commencement of the prime lease. The tenant has the exclusive right to
contest, at its sole expense, legal requirements.
INSURANCE
The tenant must maintain, or cause to be maintained, property insurance and
liability insurance. The prime lease requires that all of the insurance policies
must name the landlord as a named insured or additional insured, as applicable,
and all mortgagees as additional insureds. All policies must be written as
primary policies not contributing to any other coverage. Liability insurance
policies must contain customary contractual liability coverage for the tenant's
indemnity obligations under the prime lease. If the tenant fails to obtain the
required coverage, it will not be relieved from any indemnity obligation.
If any casualty occurs with respect to any or all of the improvements
subject to the prime lease, no rent will abate. The tenant is obligated to
restore after casualty with reasonable promptness. The prime lease specifies the
procedure for application of loss proceeds. Special provisions apply to
substantial casualties. The tenant is solely responsible for negotiating and
adjusting any property insurance proceeds. All property insurance proceeds must
be applied to restore in accordance with the disbursement procedures set forth
in the senior leasehold mortgagee's loan documents.
51
P-->

CONDEMNATION
In the case of substantial condemnation, the rent will not abate but the
lease will terminate. The landlord may, with the tenant's and the senior
leasehold mortgagee's consent, settle or compromise any condemnation award under
limited circumstances. In the case of an insubstantial condemnation near the end
of the lease term, the lease will terminate. The prime lease specifies the
procedure for application of the condemnation award to the cost of any temporary
or permanent taking of the leased premises.
ASSIGNMENT
The tenant may not assign the prime lease without the landlord's consent.
However, the tenant has the right to assign the prime lease to a leasehold
mortgagee and that leasehold mortgagee may assign the prime lease following a
foreclosure or sublet the portion of Penn Station leased to the tenant, in each
case, without the landlord's consent.
USE
The tenant may use the leased premises for any legal purpose including
retail operations and ancillary office and storage purposes. The tenant cannot,
in the course of its use and occupancy of the leased premises, interfere with
specified railroad station operations. The landlord has covenanted in the prime
lease not to pledge or encumber its interests in the tracks and platforms
located in Penn Station and the Farley Building.
TERM AND RENT
The term of the prime lease will continue until June 2032. The tenant paid
all fixed rent payable under the prime lease on June 20, 2001.
MORTGAGEE PROTECTION
The tenant has the absolute right, without the landlord's consent, to
execute one or more leasehold mortgages. If the tenant does enter into any
leasehold mortgage, the prime lease provides for the following operational
protections for the leasehold mortgagees:
- in the event of any dispute resolution proceedings, the landlord must
notify every leasehold mortgagee at the commencement of the proceeding and
those leasehold mortgagees may participate in the proceeding;
- any leasehold mortgagee may exercise any option to the extent that the
prime lease grants the tenant any option;
- if the landlord gives any notice to the tenant, the landlord must at the
same time give a copy of that notice to all leasehold mortgagees and any
leasehold mortgagee has the right to cure any default listed in the
notice;
- if the landlord receives any notice from any government or insurance
carrier relating to the premises, then the landlord must promptly give a
copy of that notice to each leasehold mortgagee; and
- any leasehold mortgagee may at any time exercise any rights or remedies of
the tenant under the prime lease.
52
P-->

DESCRIPTION OF THE FACILITY SUBLEASE
This is a summary of the principal provisions of the facility sublease. This
summary does not purport to be complete, and for more information, you should
refer to the Loan Agreement, the Mortgage Note, the Mortgage and the other
Mortgage Loan Documents. Copies of these documents may be obtained from us.
GENERAL
The borrower, as tenant under the prime lease, has entered into a facility
sublease with Amtrak for the use and occupancy of a portion of Penn Station for
a term of sixteen years with three five-year extension options, commencing on
June 20, 2001. The facility sublease was made subject to the existing retail
space leases with retail operators and leases with the Long Island Railroad and
New Jersey Transit, and therefore excludes railroad operations of, and areas
leased to, the Long Island Railroad and New Jersey Transit, already in
existence.
PARTIES
The borrower is the sublandlord under the facility sublease. Amtrak is the
subtenant under the facility sublease.
TAXES
The subtenant, as the landlord under the prime lease, is fully exempt from
the obligation to pay real property taxes and the tenant receives the benefit of
the exemption. However, if taxes are levied against the premises subject to the
facility sublease, the subtenant is obligated to pay those taxes.
REPAIRS
Under the facility sublease the subtenant has agreed to keep the leased
premises in good condition and repair, as the leased premises had been
maintained prior to the commencement of the facility sublease. The subtenant has
the exclusive right to contest, at its sole expense, legal requirements.
INSURANCE
The subtenant has agreed in the facility sublease to comply with the
sublandlord's obligations under the prime lease. See "Description of the PrimeLease--Insurance."CASUALTY AND CONDEMNATION
In the event of any material casualty and condemnation, the rent under the
facility sublease does not abate unless the facility sublease is terminated, and
in that case the borrower must pay off the remaining principal balance of the
mortgage loan and any accrued and unpaid interest and, in some cases, a
prepayment premium.
ASSIGNMENT
The subtenant may transfer its estate under the facility sublease or any
part of that estate without the sublandlord's consent and without a confirmation
from Moody's and S&P that the transfer will not result in the withdrawal or
downgrade of the rating then assigned to the certificates by them, provided that
the transfer is in connection with a sale, transfer or assignment of all or
substantially all of its assets or the sale, merger or consolidation of the
subtenant. Additionally, the subtenant may sublease the premises subject to the
facility lease or portions of the leased premises to retail and ancillary office
use tenants without the sublandlord's consent. In the event of any other
transfer, including a transfer of the assets comprising the Northeast Corridor,
a confirmation from Moody's and S&P will be required.
53
P-->

USE
The facility sublease allows the subtenant to use and occupy its leased
premises in the same manner as the prime lease. See "Description of the PrimeLease--Use."TERM AND SUBRENT
The initial term of the facility sublease will continue until June 14, 2017.
The subtenant has the absolute and unconditional right and option to extend and
renew the facility sublease for three additional successive periods of five
years each after the initial term expires. The subtenant must pay the
sublandlord the semi-annual payments beginning on December 14, 2001, in the
amounts set forth in the facility sublease. The subtenant is also obligated to
pay additional rent as required in the prime lease.
The subtenant must pay fixed rent for the period commencing June 20, 2001
and ending December 14, 2001 and for each six-month period thereafter. If the
subtenant exercises any renewal options, then the rent will be adjusted to equal
the rent for the renewal term. The facility sublease does not contain any right
of the subtenant to abate rent.
SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT AGREEMENT
The sublandlord will, within ten (10) business days after notice from the
subtenant, enter into a recordable Subordination, Nondisturbance, and Attornment
Agreement with a sub-subtenant provided that specified conditions are met. These
conditions include: (a) the sub-subtenant's sub-sublease was entered into in
good faith, at arm's length and terminates before June 13, 2017, the
sub-sublease allows the sub-subtenant to use and occupy the leased premises for
commercial purposes only, and the payments of base sub-subrent are not scheduled
to decrease; (b) the subtenant gives the sublandlord a copy of the sublease; and
(c) there are not any uncured monetary defaults under the facility sublease. If
the sublandlord fails to execute and return to the subtenant any Subordination,
Nondisturbance, and Attornment Agreement within ten (10) business days after the
sublandlord's receipt of the Subordination, Nondisturbance, and Attornment
Agreement, then the subtenant may execute the Subordination, Nondisturbance, and
Attornment Agreement on the sublandlord's behalf.
54
P-->

DESCRIPTION OF THE MORTGAGE LOAN
The following is a summary of the principal provisions of the mortgage loan.
This summary does not purport to be complete, and for more information, you
should refer to the Loan Agreement, the Mortgage Note, the Mortgage and the
other Mortgage Loan Documents. Copies of these documents may be obtained from
us.
GENERAL
The mortgage loan was originated by us in the amount of $300,000,000
pursuant to a Loan and Security Agreement (the "LOAN AGREEMENT") dated as of
June 20, 2001 between us, as lender, and the borrower. The mortgage loan is
evidenced by a promissory note in the original principal amount of $300,000,000,
executed by the borrower (the "MORTGAGE NOTE"), and is secured by a leasehold
mortgage encumbering the mortgaged property (the "MORTGAGE"), an assignment of
leases and rents, including an assignment of the facility sublease with respect
to the mortgaged property (the "ASSIGNMENTS OF LEASES"), an assignment of
insurance proceeds and condemnation proceeds pursuant to the Mortgage, and an
Environmental Indemnity Agreement executed by the borrower (the "ENVIRONMENTAL
INDEMNITY AGREEMENT"). The Loan Agreement, the Mortgage Note, the Mortgage, the
Assignments of Leases, the Environmental Indemnity Agreement and all other
documents delivered by the borrower in connection with the mortgage loan, are
collectively referred to in this prospectus as the "MORTGAGE LOAN DOCUMENTS".
The borrower has established, among other accounts, a "RESERVE ACCOUNT" and
granted to us a security interest in this account. The Reserve Account contains
funds in an amount equal to the scheduled payments due on the mortgage loan for
the first twelve-month period of the mortgage loan. The lender may apply those
funds to payments due under any Mortgage Loan Document to the extent the
borrower failed to make payments after expiration of the applicable notice and
cure period, if any. If any funds in the Reserve Account are applied in this
manner, the borrower is under no obligation to replenish the Reserve Account.
The mortgage loan is a nonrecourse obligation of the borrower except for
specified circumstances including fraud and the intentional misapplication or
misappropriation of rent. No recourse is available for the payment of the
principal, or interest or premium and any other charges of any nature arising
out of the mortgage loan against (a) any incorporator or any past, present or
future subscriber to the capital stock, stockholder, officer or director of
borrower or (b) any legal representative, or successor of any legal
representative, except that Amtrak has guaranteed us against losses incurred by
us in the event of any fraud, intentional misrepresentation or misappropriation
of funds by the borrower or any person referred to in clause (a) or (b) of the
preceding sentence.
The proceeds of the mortgage loan will be used to pay the rent due under the
prime lease and pay issuance and transaction costs.
MATURITY AND PAYMENT TERMS
The "SEMI-ANNUAL PAYMENT AMOUNT" is the amount of interest and principal due
under the mortgage loan on each Semi-Annual Payment Date.
The "SEMI-ANNUAL PAYMENT DATE" for each payment of interest on the mortgage
loan is the 14th day of each December and June, or if the 14th day is not a
business day, then the immediately preceding business day, commencing
December 14, 2001. The borrower must repay in full the entire outstanding
principal balance of the mortgage loan, together with all accrued but unpaid
interest as calculated through and including June 14, 2017, and all other
obligations regarding the Mortgage Loan Documents, on June 14, 2017.
55
P-->

Interest due on the mortgage loan on each Semi-Annual Payment Date accrues
during the period commencing on the immediately preceding Semi-Annual Payment
Date through the date immediately before the Semi-Annual Payment Date (the
"MORTGAGE LOAN ACCRUAL PERIOD"), provided that the Mortgage Loan Accrual Period
for the first Semi-Annual Payment Date on December 14, 2001 shall be from
June 20, 2001 through December 13, 2001. Interest is fixed at a rate per annum
equal to 9.25% on the basis of a 360-day year consisting of twelve months of
thirty days each. On each Semi-Annual Payment Date, the borrower must pay all
interest then accrued on account of the mortgage loan and the borrower cannot
defer or accrue payment on any interest.
The amount payable on each Semi-Annual Payment Date in respect of the
mortgage loan that is distributable to certificateholders is known as the
"SEMI-ANNUAL AMORTIZATION" in the Trust Agreement and is set forth on a schedule
attached to this prospectus as Exhibit A.
PREPAYMENT; YIELD MAINTENANCE
The borrower may prepay the mortgage loan in whole or in part, in an amount
equal to or greater than $50 million, on any Semi-Annual Payment Date after
May 31, 2006, subject to specified conditions. In the event of any prepayment,
except in connection with a casualty or condemnation or in connection with
interest payments in excess of the amount permitted by law, the borrower is
required to pay a premium (the "MAKE-WHOLE PREMIUM") equal to the excess of
(a) the discounted value of the remaining scheduled payments on the mortgage
loan, or the principal amount of the portion of the mortgage loan being prepaid,
which discounted value will be calculated with reference to United States
Treasury securities with the related maturity of the remaining scheduled
payments plus 0.50% over (b) the principal amount of the mortgage loan, or the
principal amount of the portion of the mortgage loan being prepaid. The borrower
must give us at least ten (10) days' notice of the requested prepayment.
TITLE INSURANCE POLICIES
The title insurance policy covering the mortgaged property insures that the
Mortgage constitutes a valid and enforceable first lien on the mortgaged
property subject to exceptions and exclusions from coverage set forth therein.
All premiums with respect to the title insurance have been paid.
ENCUMBRANCES; ADDITIONAL INDEBTEDNESS
The borrower may not permit the mortgaged property or any other collateral
for the mortgage loan to be encumbered by any liens other than: (1) those
created by the Mortgage Loan Documents; (2) the items listed as exceptions in
the title insurance policy covering the mortgaged property as of June 20, 2001;
(3) future liens for property taxes and assessments not then delinquent;
(4) liens for real estate and personal property taxes and vault charges and all
other taxes, levies and other similar charges levied by a governmental authority
on the mortgaged property not yet due and payable; (5) in the case of liens
arising after June 20, 2001, statutory liens of carriers, warehousemen,
mechanics, materialmen and other similar liens arising by operation of law, that
are incurred in the ordinary course of business and in accordance with the
restrictions contained in the Loan Agreement and discharged by the borrower by
payment, bonding or otherwise within 45 days after the filing of the relevant
lien or that are being contested in good faith; (6) liens arising from
reasonable and customary purchase money financing of personal property and
equipment leasing to the extent the same are created in the ordinary course of
business; (7) all easements, rights-of-way, restrictions and other similar
charges or non-monetary encumbrances against real property that do not
materially and adversely affect (a) the ability of the borrower to pay any of
its obligations to any person as and when due, (b) the marketability of title to
the mortgaged property, or (c) the use or operation of the mortgaged property;
(8) rights of existing and future tenants, as tenants only, pursuant to the
leases of the mortgaged property; and (9) any other lien to which the lender may
expressly consent in writing.
56
P-->

The borrower is not permitted to incur any additional indebtedness other
than unsecured trade payables incurred in the ordinary course of business;
provided, however, that (a) the same is not secured by a lien on the mortgaged
property, (b) each trade payable is not overdue by more than 60 days and (c) at
any one time, the amount of all trade payables do not exceed $150,000 in the
aggregate.
INSURANCE
The borrower is required to maintain with respect to the mortgaged property
the following insurance: (1) all-risk property insurance with loss limits of not
less than the greater of: (a) one hundred percent (100%) of the replacement
value of the improvements and (b) the then outstanding principal amount of the
mortgage loan, and covering physical damage sustained by the improvements
including tenant improvements and betterments; (2) commercial general liability
insurance with limits of $100,000,000 per occurrence and in the aggregate;
(3) flood insurance if the mortgaged property is located in an area designated
as "flood prone" or a "special flood hazard area" under applicable law;
(4) builders risk insurance with limits of not less than the full replacement
value of the construction/ rehabilitation project performed by the borrower,
provided the work is estimated to cost in excess of $5,000,000; and
(5) comprehensive boiler and machinery insurance covering all mechanical and
electrical equipment against physical damage and breakdown. All the required
insurance must be written by insurers who carry an A.M. Best rating of A:X or
better. The borrower may use insurance written by Amtrak's captive insurance
company, provided that the risk is reinsured with insurers who carry an A.M.
Best rating of A:X or better.
CONDEMNATION AND CASUALTY
Promptly after the occurrence of any material damage or destruction to all
or any material portion of the mortgaged property or a condemnation of any
material portion of the mortgaged property, the borrower is obligated to
commence and diligently prosecute to completion the restoration of the mortgaged
property. The borrower must pay or cause to be paid all the costs of a
restoration, whether or not these costs are covered by insurance. If (a) the
insurance proceeds paid or payable are less than $75,000,000 (the "RESTORATION
THRESHOLD"); (b) the estimated cost of completing the restoration does not
exceed the Restoration Threshold; and (c) no Event of Default has occurred and
is continuing under the Loan Agreement or the facility sublease, the borrower
may receive and apply the proceeds to the restoration of the mortgaged property;
otherwise, the proceeds must be paid to the lender for disbursement as provided
below.
If the net proceeds of the casualty or condemnation or the costs of
restoration of the mortgaged property are above the Restoration Threshold, the
lender is required to make the net proceeds of a casualty or condemnation
available to the borrower for restoration, provided (1) there is no monetary
Event of Default under the mortgage loan, then the borrower may apply the
insurance proceeds to restoration of the mortgaged property, (2) the sum of the
following amounts held (or to be held and disbursed) by or on behalf of the
lender: (a) insurance proceeds; (b) cash; and (c) the value of any other
security delivered by or on behalf of the borrower (the "RESTORATION FUND") must
first be applied to pay for the lender's reasonable costs and expenses; (3) the
balance of the Restoration Fund is equal to or greater than the estimated cost
of restoration; (4) the date by which the lender's engineer has determined it is
reasonable to believe that restoration will be completed (the "PROJECTED
RESTORATION DATE") must be no later than 18 months after the adjustment of the
insurance claim for casualty; the Projected Restoration Date must not be later
than 3 months before June 14, 2017; (5) the improvements may legally be restored
to substantially the same condition, size, height, bulk and other material
characteristics as they existed immediately before the casualty; and (6) the
borrower must have engaged as construction manager or general contractor a
nationally recognized construction company with substantial experience in the
state. If these conditions are not met, the net proceeds received
57
P-->

under any insurance policy may be used to repay all obligations and liabilities
of the borrower to the lender arising out of any Mortgage Loan Document,
including the borrower's obligation to repay the mortgage loan, and to reimburse
any amount advanced by the lender, as the lender deems reasonably appropriate in
the lender's sole and absolute discretion.
FINANCIAL REPORTING
The borrower is required to maintain systems of accounting established and
administered in accordance with sound business practices and sufficient in all
respects to permit preparation of financial statements, including statements of
operations and retained earnings, statements of cash flow and balance sheets and
other financial reports as the borrower regularly prepares in conformity with
generally accepted accounting principles.
The borrower is required to furnish to the lender annually, within the
lesser of: (a) 120 days after the end of each fiscal year of the borrower, or
(b) 21 days after receipt by the borrower of its financial statements in final
form, a copy of its financial statements, as discussed in the preceding
paragraph, that are audited by a "Big Five" accounting firm or another firm of
certified public accountants acceptable to the lender. The borrower is also
required to furnish to the lender certified rent rolls and schedules of security
deposits held under the leases for the mortgaged property and the financial
statements of Amtrak delivered to the borrower pursuant to the terms of the
facility sublease.
REPRESENTATIONS AND WARRANTIES
The borrower has made customary representations and warranties in the
Mortgage Loan Documents including representations and warranties about: (a) due
organization of the borrower in its state of formation and qualification to do
business in the state where the mortgaged property is located,
(b) enforceability of the Mortgage Loan Documents, (c) title to the mortgaged
property, (d) the financial condition of the borrower and the mortgaged
property, (e) compliance of the mortgaged property with applicable laws,
(f) the leases and other contracts and agreements affecting the mortgaged
property, (g) the physical condition of the mortgaged property, (h) the
non-existence of any litigation affecting the borrower or the mortgaged
property, and (i) environmental matters; in each case, any exception to which
could reasonably be expected to have a material adverse effect on the business,
operations or condition of the borrower or the impairment of the ability of the
lender to enforce the Mortgage Loan Documents or collect the mortgage loan.
EVENTS OF DEFAULT UNDER MORTGAGE LOAN "EVENTS OF DEFAULT" under the Mortgage Loan Documents include, among others,
the occurrence or existence of any one or more of the following:
(a) failure of the borrower to pay any Semi-Annual Payment Amount or other
scheduled payment amount when due under any Mortgage Loan Document
(whether the payment is interest or principal);
(b) failure of the borrower to pay any other amount from time to time owing
under the Mortgage Loan Documents within 30 days after written notice to
the borrower that the payment is due;
(c) occurrence of any Event of Default or other default, beyond any
applicable grace period under any other Mortgage Loan Document;
(d) violation of any Transfer Prohibition (as defined in the Mortgage Loan
Documents) or any other attempted transfer, assignment or further
mortgaging or encumbrance by the borrower of the mortgaged property or
under the Mortgage Loan Documents;
(e) breach of any of the material SPE covenants (as defined in the Mortgage
Loan Documents);
58
P-->

(f) occurrence of any "Event of Default" under the prime lease or the
facility sublease;
(g) any default on the part of the borrower which results in a material
adverse effect on the use and operations of the mortgaged property or
business of the borrower;
(h) failure of the borrower to perform or comply with any non-monetary
obligation in the Loan Agreement or any other Mortgage Loan Document,
which failure is not cured within 30 days after receipt by the borrower
of written notice of the default, or another period as may reasonably be
required, which shall not in any event be longer than 180 days after the
borrower's receipt of the original notice of default; or
(i) (1) an involuntary bankruptcy is commenced against the borrower or a
decree or order of a court is entered for the appointment of a receiver
or other officer with respect to the borrower or the mortgaged property
which proceeding or decree or order is not dismissed or discharged within
120 days after the commencement or entry thereof; (2) the borrower
commences a voluntary case under the Bankruptcy Code or any applicable
similar law, or consents to the entry of an order for relief in an
involuntary case or to the conversion of an involuntary case affecting
the borrower to a voluntary case under the Bankruptcy Code or any
applicable similar law; or (3) the borrower makes an assignment for the
benefit of creditors.
DEFAULT INTEREST RATE
From and after the occurrence of any uncured default, after the expiration
of any grace period, and continuing until the earlier to occur of (a) the
default being cured or waived or (b) all obligations of the borrower to the
lender arising out of any Mortgage Loan Document being paid in full, the
mortgage loan will bear interest at the per annum rate of interest equal to the
fixed rate of interest equal to 9.25% per annum plus 5% per annum, but this rate
may not exceed the maximum rate permitted under applicable law.
GOVERNING LAW
The Mortgage Loan Documents are governed by the laws of the State of New
York.
59
P-->

DESCRIPTION OF THE TRUST AGREEMENT
The following is a summary of the principal provisions of the Trust
Agreement. This summary does not purport to be complete, and for more
information, you should refer to the Trust Agreement. A copy of the Trust
Agreement can be obtained from us.
DUTIES OF THE TRUSTEE
In general, the trustee will be responsible for the administration of the
mortgage loan. The trustee undertakes: (a) except during the continuance of an
Event of Default actually known to the trustee, to perform its duties as
specifically set forth in the Trust Agreement, and no implied covenants or
obligations will be read into the Trust Agreement against the trustee; and
(b) while an Event of Default actually known to the trustee has occurred and is
continuing, to exercise the rights and powers vested in it by the Trust
Agreement to the extent directed by the Majority Certificateholders, and to use
the same degree of care and skill in connection with the exercise of those
rights and powers as may be commercially reasonable under the circumstances.
In the absence of bad faith on its part, the trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed,
upon certificates or opinions furnished to the trustee and conforming to the
requirements of the Trust Agreement; but in the case of any certificates or
opinions which by any provision of the Trust Agreement are specifically required
to be furnished to the trustee, the trustee will be under a duty to examine the
certificates or opinions to determine whether or not they conform to the
requirements of the Trust Agreement. The trustee will not be responsible for the
accuracy or content of any certificate or opinion.
In order to secure and protect the issuer's and the certificateholders'
interest in the mortgage loan, the trustee will, to the limited extent described
in the Trust Agreement, make payments on the certificates, serve as custodian of
the files relating to the mortgage loan, establish accounts, and collect,
distribute and identify funds solely in the manner it is directed.
Notwithstanding the trustee's performance of these functions, the trustee's
duties will be performed solely for the benefit of the certificateholders.
The trustee makes no representations as to the validity or sufficiency of
the Trust Agreement, the Mortgage Loan Documents, the mortgage loan or the
certificates, except that the trustee has represented and warranted that the
Trust Agreement has been, and each certificate will be, executed and delivered
by one of its officers who is duly authorized to execute and deliver the
document on its behalf.
The trustee may resign at any time by giving written notice of resignation
to the certificateholders and us. If a successor trustee has not accepted
appointment within 30 days, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee. The trustee
may be removed at any time by the certificateholders evidencing Fractional
Undivided Interests aggregating not less than a majority in interest in the
issuer (the "MAJORITY CERTIFICATEHOLDERS") for cause or by the
certificateholders evidencing Fractional Undivided Interests aggregating not
less than 66 2/3% in interest in the issuer (the "REQUIRED CERTIFICATEHOLDERS")
without cause, and in either case, will specify the date when the removal will
take effect, but in no event will the date of the removal be sooner than
30 days following notice to the trustee. "FRACTIONAL UNDIVIDED INTEREST" means
the fractional undivided interest in the issuer that is evidenced by a
certificate.
MODIFICATIONS, WAIVERS, AMENDMENTS AND CONSENTS
In the event that the trustee, as holder of the mortgage loan in trust for
the benefit of the certificateholders, receives a request for a consent to any
waiver, consent, amendment, modification, waiver or supplement under any
Mortgage Loan Document, the trustee will promptly send a notice of the proposed
consent, amendment, modification, waiver or supplement to each
certificateholder. The
60
P-->

trustee will request from the certificateholders direction, consent or waiver as
to: (a) whether or not to take or refrain from taking any action under the
relevant Mortgage Loan Document and (b) whether or not to give or execute any
waivers, consents, amendments, modifications or supplements to the relevant
Mortgage Loan Document. The trustee will take the action set forth in the
direction, consent or waiver delivered by the Required Certificateholders, but
the trustee will not be obligated to consent to any proposed amendment,
modification, waiver or supplement of any Mortgage Loan Document that would
create any additional obligations or responsibilities of the trustee.
ACCOUNTS CERTIFICATE ACCOUNT. The trustee will establish and maintain on behalf of
the certificateholders a Certificate Account. On each day when a scheduled
payment is made under the Mortgage Note to the trustee as the holder of the
mortgage loan, the trustee will promptly deposit the aggregate amount of the
payment in the Certificate Account. On each Distribution Date, the trustee will
withdraw from the Certificate Account the following amounts in the following
priority: (a) to pay the trustee in its individual capacity the net amount of
compensation and other payments due to it; and (b) to distribute pro rata to the
certificateholders the amounts remaining on deposit in the Certificate Account.
The Certificate Account must be an account with Wells Fargo Bank, National
Association, or with the trust department of a commercial bank or with any
banking institution the long term debt rating of which is at least "A" as
ascribed by S&P, or "A2" as ascribed by Moody's, and which is an FDIC-insured
institution.
INVESTMENT OF AMOUNTS HELD BY TRUSTEE. Any money received by the trustee
and not promptly distributed will, to the extent practicable, be invested from
time to time in government securities and other investment grade obligations
specified in the Trust Agreement (the "SPECIFIED INVESTMENTS"). Any investment
made in Specified Investments will be in Specified Investments having maturities
not later than the date that any funds invested are required to be used and the
trustee will hold any Specified Investments until maturity. Except under
specified circumstances, all income and earnings from the Specified Investments,
net of the trustee's reasonable actual expenses in making those investments,
will be held and applied by the trustee in the same manner as the principal used
to make the investment is to be applied and any losses, net of reasonable fees
and expenses, will be charged against the principal amount invested.
PAYMENT OF THE CERTIFICATES. All amounts payable on and with respect to the
certificates will be payable at the principal office of the trustee, in lawful
money of the United States of America. If any certificateholder provides written
notice to the trustee, the trustee will make all payments on and with respect to
the certificates before 11:00 A.M. New York, New York time on the date of
payment by wire transfer of immediately available federal funds.
AMENDMENTS
Without the consent of the certificateholders, we and the trustee may
supplement the Trust Agreement to cure any ambiguity, to correct or supplement
any provision in the Trust Agreement which may be defective or inconsistent with
any other provision in the Trust Agreement or to make any other provisions with
respect to matters or questions arising under the Trust Agreement. No action
taken without the consent of certificateholders may adversely affect their
interests.
With the consent of or upon the direction of the Majority
Certificateholders, we and the trustee may supplement the Trust Agreement for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Trust Agreement or modifying in any manner the
rights and obligations of the certificateholders under the Trust Agreement. The
will not be required to execute or agree to any agreement that would create
additional obligations or responsibilities of the trustee without adequate
compensation. No supplemental agreement will, without the consent of the holder
of each outstanding certificate affected by the supplemental agreement:
(a) except as expressly
61
P-->

permitted by the Trust Agreement, change in any manner the amount of, or delay
the timing of, any receipt by the trustee of payments on the mortgage loan or
distributions that are required to be made on any certificate, or change any
date of payment on any certificate, or change the place of payment where, or the
coin or currency in which, any certificate is payable, or impair the right to
institute suit for the enforcement of any payment or distribution on any
certificate on or after the applicable Distribution Date; or (b) permit the
disposition of the mortgage loan or other property of the Trust Fund except as
permitted by the Trust Agreement, or otherwise deprive any certificateholder of
the benefit of the ownership of the mortgage loan or the other property of the
Trust Fund; or (c) reduce the percentage of the aggregate Fractional Undivided
Interests of the issuer which is required for any supplemental agreement, or
reduce the percentage required for any waiver (of compliance with provisions of
the Trust Agreement and their consequences or defaults under the Trust
Agreement) provided for in the Trust Agreement; or (d) reduce the percentage of
the aggregate Fractional Undivided Interests of the issuer which is required to
either (1) amend, modify, waive or supplement any of the Mortgage Loan Documents
or (2) direct the trustee to initiate any of the remedies as provided in the
Trust Agreement or (e) modify any of the provisions of the Trust Agreement
relating to supplemental agreements or waiver of defaults, except to increase
any required percentage or to provide that other provisions of the Trust
Agreement cannot be modified or waived without the consent of the holder of each
outstanding certificate.
In executing, or accepting the additional trusts created by, any
supplemental agreement, the trustee will be entitled to receive an opinion of
counsel stating that the execution of the supplemental agreement is authorized
or permitted by the Trust Agreement.
TERMINATION
The respective obligations and responsibilities of the trustee created under
the Trust Agreement will terminate upon the final and irrevocable distribution
to all certificateholders of all amounts required to be distributed to them
pursuant to the Trust Agreement. Upon payment and discharge, all property,
rights and interests conveyed or assigned or pledged will revert to us, and the
estate, right, title and interest of the trustee and the certificateholders in
the issuer will cease, terminate and become void and will be deemed released;
and the trustee, in that case, will execute and deliver to us a proper
instrument or proper instruments acknowledging the satisfaction and termination
of the Trust Agreement, and will convey, assign and transfer, or cause to be
conveyed, assigned or transferred, and will deliver or cause to be delivered to
the mortgagors all property, including money, then held by the trustee.
THE TRUSTEE
Wells Fargo Bank Northwest, N.A., a national banking association with its
principal offices located in Salt Lake City, Utah, will act as trustee on behalf
of the certificateholders. The corporate trust office of the trustee is located
at 79 South Main Street, Salt Lake City, Utah84111, Attn: Corporate Trust
Services. Certificate registration services are provided at the trustee's
offices located at 79 South Main Street, Salt Lake City, Utah84111.
INDEMNIFICATION
The trustee and any director, officer, employee or agent of the trustee will
be indemnified by the Trust Fund and held harmless against any claim, loss,
liability or expense, including reasonable attorneys' fees and expenses incurred
in connection with any breach of the Trust Agreement, any claim or legal action,
including any pending or threatened claim or legal action relating to the
acceptance or administration of its powers and duties pursuant to the Trust
Agreement or the certificates, other than: (a) allocable overhead, (b) expenses
or disbursements incurred or made by or on behalf of the trustee in the normal
course of the trustee's performing its routine duties unrelated to a breach or
default in accordance with any of the provisions of the Trust Agreement,
(c) any expense or liability specifically
62
P-->

required to be borne by the trustee pursuant to the terms of the Trust
Agreement, or (d) any claim, loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of its duties
under the Trust Agreement or due to of reckless disregard of its obligations and
duties under the Trust Agreement or due to its failure to use ordinary care in
receiving, handling or disbursing funds, or as may arise from a breach of any
representation, warranty or covenant of the trustee made in the Trust Agreement
or in the Certificate Purchase Agreement, dated as of June 20, 2001, among us,
the trustee and the purchasers identified in the Certificate Purchase Agreement.
ELIGIBILITY REQUIREMENTS
The trustee must be an institution organized and doing business under the
laws of the United States of America or of any state, authorized under those
laws to exercise corporate trust powers, having a combined capital, surplus and
undivided profits of at least $250,000,000, or the obligations and liabilities
of which are irrevocably and unconditionally guaranteed by an affiliated person
having a combined capital, surplus and undivided profits of at least
$250,000,000, and subject to supervision or examination by federal or state
authority. Also, the trustee must be a bank (as defined in the Investment
Company Act of 1940). If the institution publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then the combined capital, surplus and undivided profits of the
institution will be deemed to be its combined capital, surplus and undivided
profits as set forth in its most recent published report.
The trustee may not, directly or indirectly, through one or more
intermediaries, control, be controlled by, or be under common control with, the
issuer or with any person involved in the organization or operation of the
issuer. The trustee may not offer or provide credit or credit enhancement to the
issuer. If at any time the trustee ceases to be eligible in accordance with
these provisions, it will resign immediately.
TRUSTEE COMPENSATION
The principal compensation to be paid to the trustee in respect of its
services under the Trust Agreement will be a fee of $5,000 per year.
TAX RELATED PROVISIONS
The trustee will prepare and sign on behalf of the issuer and file in a
timely manner with the appropriate governmental authorities any tax returns the
issuer is required to file pursuant to applicable federal, state or local tax
laws. To the extent authorized under the Internal Revenue Code, and the
regulations promulgated thereunder, each certificateholder has irrevocably
appointed and authorized the trustee to be its attorney-in-fact for purposes of
signing any tax returns required to be filed on behalf of the issuer.
The trustee, as trustee of a grantor trust, will exclude and withhold from
each distribution of amounts due pursuant to the Trust Agreement or under the
certificates any and all withholding taxes as required by law. The trustee will
act as the withholding agent and, in connection therewith, whenever any present
or future taxes or similar charges are required to be withheld with respect to
any amounts payable in respect of the certificates, will withhold amounts and
timely pay the same to the appropriate authority in the name of and on behalf of
the certificateholders, will file any necessary withholding tax returns or
statements when due, and will deliver to each certificateholder appropriate
documentation showing the payment thereof, together with additional documentary
evidence as the holders may reasonably request from time to time. The trustee
will file any other information reports as it may be required to file under
United States law.
63
P-->

TAXATIONFEDERAL INCOME TAX CONSEQUENCESGENERAL
This is a general discussion of the material federal income tax consequences
of owning the certificates. This discussion is directed to investors that hold
the certificates as "capital assets" within the meaning of Section 1221 of the
Code and investors who are U.S. Holders. It does not discuss all federal income
tax consequences that may be relevant to owners of certificates, particularly as
to investors subject to special treatment under the Code, including, without
limitation, banks, insurance companies, dealers in securities or currencies,
traders in securities, tax-exempt entities, holders whose functional currency is
not the U.S. dollar and persons that are not U.S. Holders, except as described
below under "--Non-U.S. Holders." A "U.S. Holder" means a beneficial owner of a
certificate who is, for U.S. federal income tax purposes: (a) an individual
citizen or resident of the United States, (b) a corporation organized under the
laws of the United States, any state or the District of Columbia, (c) an estate
the income of which is subject to U.S. federal income tax without regard to its
source, or (d) a trust if a U.S. court is able to exercise primary supervision
over administration of the trust and one or more U.S. persons have authority to
control all substantial decisions of the trust.
Further, this discussion and any legal opinions referred to in this
discussion are based on the Code, Treasury Regulations, Internal Revenue Service
rulings and pronouncements and judicial decisions now in effect, all of which
can change, or be differently interpreted, with possible retroactive effect. No
rulings have been or will be sought from the IRS with respect to any of the
federal income tax consequences discussed below. Accordingly, the IRS may take
contrary positions.
The authorities on which this summary is based are subject to various
interpretations, and it is possible that the U.S. federal income tax treatment
of the purchase, ownership and disposition of the certificates may differ from
the treatment described below.
U.S. HOLDERSCLASSIFICATION OF THE CERTIFICATES AND THE ISSUER
Assuming full compliance with the terms of the Trust Agreement and other
documents, the issuer will be treated as a "grantor trust" and not as an
association taxable as a corporation or as a "taxable mortgage pool" (within the
meaning of Section 7701(i) of the Code). As a result, each beneficial owner of
certificates will be treated for U.S. federal income purposes as if it owned
directly its pro rata share of the Mortgage Note (See "Description of theMortgage Loan--General") held by the issuer and will be required to include in
its gross income its pro rata share of the interest income, paid or accrued with
respect to the Mortgage Note, whether or not cash is actually distributed to the
holders. See "--Interest Income."INTEREST INCOME
A holder of a certificate will be required to include in gross income its
pro rata share of the interest income from the portion of the Mortgage Note
represented by that certificate, as that income is received or accrued by the
issuer in accordance with the holder's method of tax accounting.
MARKET DISCOUNT
If a holder purchases a portion of the Mortgage Note represented by a
certificate at a market discount, the holder generally will be required to treat
any principal payments on, or any gain on the disposition on maturity of, that
portion of the Mortgage Note as ordinary income to the extent of the accrued
market discount not previously included in income at the time of the payment or
disposition. In general, subject to a DE MINIMIS exception, market discount is
the amount by which a holder's pro
65
P-->

rata share of the Mortgage Note's stated redemption price at maturity exceeds
the amount for which the holder purchased the certificate representing its pro
rata share. Market discount on a holder's portion of the Mortgage Note will
accrue on a straight-line basis, unless the holder elects to accrue the discount
on a constant yield to maturity basis. This election is irrevocable and, if made
with respect to the holder's portion of the Mortgage Note, applies only to the
holder's pro-rata share of the Mortgage Note and not to other market discount
obligations held by the holder. A holder may also elect to include market
discount in income currently as it accrues. This election, once made, applies to
all market discount obligations acquired on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS. If a holder acquires a pro-rata share of the Mortgage Note
at a market discount and disposes of the certificate representing its share of
the Mortgage Note in otherwise nontaxable transactions, accrued market discount
will be includable as ordinary income to the holder as if the holder had sold
the certificate at fair market value. A holder of a portion of the Mortgage Note
with market discount may be required to defer until the maturity of the Mortgage
Note or, in some circumstances, the earlier disposition of a certificate, the
deduction of all or a portion of the interest expense attributable to debt
incurred or continued to purchase or carry the certificate, unless an election
to include the market discount on a current basis is made.
AMORTIZABLE BOND PREMIUM
If a holder purchases a certificate representing a portion of the Mortgage
Note for an amount in excess of the amount of the Mortgage Note's stated
redemption price at maturity allocable to the certificate, the holder will
generally be considered to have purchased the certificate with "amortizable bondpremium." A holder generally may elect to amortize the premium using the
constant yield to maturity method. The amount amortized in any year will
generally be treated as a reduction of the holder's interest income on its
portion of the Mortgage Note. If the amortizable bond premium allocable to a
year exceeds the amount of interest allocable to that year, the excess would be
allowed as a deduction for that year but only to the extent of the holder's
prior interest inclusions on its portion of the Mortgage Note. If the holder
does not make that election, the premium on certificate will decrease the gain
or increase the loss otherwise recognized on the sale, exchange or redemption of
the certificate. The election to amortize the premium on a constant yield to
maturity method, once made, generally applies to all bonds held or subsequently
acquired by the holder on or after the first day of the first taxable year to
which the election applies. A holder may not revoke this election without the
consent of the IRS.
SALE, EXCHANGE OR REDEMPTION OF CERTIFICATES
A holder that sells or exchanges a certificate, including through a
redemption for cash, will recognize gain or loss equal to the difference between
the holder's adjusted tax basis in the certificate and the amount realized on
the sale of the certificate. A holder's adjusted tax basis in the certificate
generally will be its initial purchase price increased by market discount
previously included in income, if any, and reduced by any bond premium
previously amortized. A defeasance of the mortgage loan by the borrower under
the Mortgage Loan Documents (See "Description of the Mortgage Loan--General")
will be treated as a sale or exchange of the certificates.
Subject to the market discount rules discussed above, this gain or loss
generally will be a capital gain or loss, except to the extent any amount
realized is treated as a payment of accrued interest with respect to the
holder's pro rata share of the Mortgage Note required to be included in income,
and generally will be long-term capital gain or loss if the certificate has been
held for more than one year.
A holder who sells its certificate between record dates for payments of
distributions will be required to include accrued but unpaid interest on the
Mortgage Note through the date of disposition as ordinary income and to add the
amount of the accrued but unpaid interest to its adjusted tax basis in the
certificate. To the extent the selling price is less than the holder's adjusted
tax basis, the holder
66
P-->

will recognize a capital loss. Subject to limited exceptions, a holder cannot
offset ordinary income against capital losses for U.S. federal income tax
purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The amount of interest income paid in respect of the certificates held of
record by U.S. Holders, other than corporate and other exempt U.S. Holders, will
be reported to the IRS. Backup withholding at a rate up to 31% may apply to
payments of interest to some non-exempt U.S. Holders unless the U.S. Holder
furnishes its taxpayer identification number and other information, certified
under penalties of perjury.
Payments of the proceeds from the disposition of certificates to or through
the U.S. office of a broker are subject to information reporting and backup
withholding unless the holder establishes an exemption from information
reporting and backup withholding.
Any amounts withheld from a holder under the backup withholding rules may be
credited against the holder's U.S. federal income tax liability and any excess
may be refundable if the proper information is provided to the IRS.
NON-U.S. HOLDERS
A "Non-U.S. Holder" is a person who is not a U.S. Holder. This disclosure
does not cover the U.S. federal tax rules that apply to Non-U.S. Holders that
pay federal income tax on a net basis on income or gain with respect to the
certificates because that income or gain is effectively connected with the
conduct of a U.S. trade or business.
Payments by the issuer to any holder of a certificate who or which is a
Non-U.S. Holder will generally not be subject to U.S. federal income tax or
withholding tax, provided that:
(1) the beneficial owner of the certificate does not actually or
constructively own 10 percent or more of the capital or profits interest in
the borrower;
(2) the beneficial owner of the certificate is not a controlled foreign
corporation that is related to the borrower; and
(3) the Non-U.S. Holder properly certifies as to its foreign status as
described below.
A Non-U.S. Holder can generally meet the certification requirement by
providing a properly executed Form W-8 or suitable substitute form. If the
holder holds the certificate through a financial institution or other agent
acting on the holder's behalf, the holder may be required to provide appropriate
certifications to the agent. The holder's agent will then generally be required
to provide appropriate certifications to the issuer. Special rules apply to
foreign partnerships, estates and trusts, and in some circumstances
certifications as to foreign status of partners, trust owners or beneficiaries
may have to be provided to the issuer. In addition, special rules apply to
qualified intermediaries that enter into withholding agreements with the IRS,
and those intermediaries generally are not required to forward any certification
forms received from Non-U.S. Holders.
A Non-U.S. Holder of a certificate will generally not be subject to U.S.
federal income tax or withholding tax on any gain realized upon the sale,
redemption, retirement, or other disposition of a certificate other than gain
attributable to accrued interest, which is addressed in the preceding paragraph
unless the Non-U.S. Holder is an individual who is present in the U.S. for
183 days or more during the taxable year and meets other conditions.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting will apply to payments of interest in
respect of the certificates and backup withholding at a rate up to 31% will
apply with respect to the payments unless the Non-U.S. Holder appropriately
certifies as to its foreign status or otherwise establishes an exemption.
67
P-->

Information reporting requirements and backup withholding tax generally will
not apply to any payments of the proceeds of the sale of a certificate effected
outside the U.S. by a foreign office or a foreign broker (as defined in
applicable Treasury regulations). However, unless the broker has documentary
evidence in its records that the beneficial owner is a Non-U.S. Holder and other
conditions are met, or the beneficial owner otherwise establishes an exemption,
information reporting but not backup withholding will apply to any payment of
the proceeds of the sale of a certificate effected outside the U.S. by a broker
if it:
(1) derives 50% or more of its gross income for specified periods from
the conduct of a trade or business in the U.S.;
(2) is a controlled foreign corporation for U.S. federal income tax
purposes; or
(3) is a foreign partnership that, at any time during its taxable year,
has 50% or more of its income or capital interests owned by U.S. persons or
is engaged in the conduct of a U.S. trade or business.
Payments of the proceeds of a sale of a certificate effected by the U.S.
office of a broker will be subject to information reporting requirements and
backup withholding tax unless the Non-U.S. Holder properly certifies under
penalties of perjury as to its foreign status and other conditions are met or it
otherwise establishes an exemption.
Any amount withheld under the backup withholding rules may be credited
against the Non-U.S. Holder's U.S. federal income tax liability and any excess
may be refundable if the proper information is provided to the IRS.
U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of global securities holding securities through
Clearstream Banking, Euroclear or DTC will be subject to the 30% U.S.
withholding tax that generally applies to payments of interest, including
original issue discount, on registered debt issued by U.S. Persons, unless
(a) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in the
chain or intermediaries between the beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(b) the beneficial owner takes one of the following steps to obtain an exemption
or reduced tax rate. The term "U.S. Person" means (a) a citizen or resident of
the United States, (b) a corporation, partnership (except to the extent provided
in the applicable Treasury regulations) or other entity created or organized in
or under the laws of the United States, any state or the District of Columbia,
including an entity treated as a corporation or partnership for federal income
tax purposes, (c) an estate that is subject to United States federal income tax,
regardless of the source of income or (d) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust, and one or more U.S. Persons have the authority to control all
substantial decisions of the trust (or to the extent provided in applicable
Treasury regulations, some trusts in existence on August 20, 1996 which are
eligible to be treated as U.S. Persons). This summary does not deal with all
aspects of U.S. federal income tax withholding that may be relevant to foreign
holders of the global securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
global securities.
Exemption for non-U.S. Persons (Form W-8BEN): Beneficial owners of global
securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding). If the information shown on
Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of the
change.
Exemption for non-U.S. Persons with effectively connected income
(Form W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with
a U.S. branch, for which the interest income is
68
P-->

effectively connected with its conduct of a trade or business in the United
States, can obtain an exemption from the withholding tax by filing Form W-8ECI
(Certificate of Foreign Person's Claim for Exemption from Withholding on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form W-8BEN). Non-U.S. Persons residing in a country that has a tax treaty with
the United States can obtain an exemption or reduced tax rate by filing
Form W-8BEN.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of a global security
or, in the case of a Form W-8ECI filer, his agent, files by submitting the
appropriate form to the person through whom it holds, or the clearing agency, in
the case of persons holding directly on the books of the clearing agency.
Form W-8BEN and Form W-8ECI are effective until the third succeeding calendar
year from the date the form is signed.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "FederalIncome Tax Consequences," potential investors should consider the state and
local tax consequences concerning the certificates. State tax law may differ
substantially from the corresponding federal law, and the discussion above does
not purport to describe any aspect of the tax laws of any state or other
jurisdiction. Therefore, prospective investors should consult their tax advisors
with respect to the various tax consequences of investments in the certificates.
ERISA CONSIDERATIONS
Title I of ERISA and Section 4975 of the Code impose restrictions on some
retirement plans and other employee benefit plans and arrangements, including
individual retirement accounts, Keogh plans, collective investment funds,
insurance company separate accounts and some insurance company general accounts
in which those plans, accounts or arrangements are invested, referred to
collectively as "Plans", and on persons who are "parties in interest" (as
defined in Section 3(14) of ERISA) or "disqualified persons" (as defined in
Section 4975(e)(2) of the Code) with respect to those Plans. Sections 401-414 of
ERISA impose duties on persons who are fiduciaries (as defined in Section 3(21)
of ERISA) of Plans. Section 406 of ERISA prohibits specified transactions
between a Plan and its fiduciaries and/or parties in interest with respect to
that Plan and Section 4975 of the Code imposes a tax on specified prohibited
transactions between a Plan and a disqualified person with respect to that Plan.
Some employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and church plans (as defined in Section 3(33) of ERISA
and provided no election has been made under Section 410(d) of the Code), are
not subject to some ERISA restrictions or Code restrictions, and assets of those
plans may be invested in the certificates without regard to the ERISA
considerations described below, subject to the provisions of applicable federal,
state and local law.
Investments by Plans are subject to ERISA's general fiduciary requirements,
including the requirement of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan.
Plan fiduciaries must also determine whether the acquisition and holding of
the certificates and the operations of the issuer would result in direct or
indirect prohibited transactions. The purchase and holding of a certificate or
any interest in a certificate by or on behalf of a Plan could result in
prohibited transactions and the imposition of excise taxes and civil penalties
under ERISA or the Code unless a U.S. Department of Labor, or "DOL", prohibited
transaction exemption applies and the
69
P-->

conditions for that exemption are satisfied. The operations of the issuer could
similarly result in prohibited transactions if Plans that purchase the
certificates are deemed to own an interest in the underlying assets of the
issuer. There may also be an improper delegation by Plan fiduciaries of the
responsibility to manage Plan assets if Plans that purchase certificates are
deemed to own an interest in the underlying assets of the issuer.
The DOL has issued a final regulation, 29 C.F.R. Section 2510.3-101,
concerning what constitutes the assets of a Plan. This plan assets regulation
provides that, as a general rule, the underlying assets and properties of
corporations, partnerships, trusts and certain other entities in which a Plan
makes an "equity" investment will be deemed for purposes of ERISA to be assets
of the investing Plan unless specified exceptions apply. Accordingly, if a Plan
purchases the certificates, the issuer could be deemed to hold plan assets
unless one of the exceptions under the plan assets regulation is applicable to
the issuer.
There can be no assurance that any of the exceptions set forth in the plan
assets regulation will apply to the purchase of the certificates or operations
of the issuer. However, the DOL issued a prohibited transaction exemption to
Credit Lyonnais Securities (USA), Inc., the placement agent in the private sale
of the certificates on June 20, 2001, prohibited transaction exemption 97-21E,
as amended by prohibited transaction exemption 2000-58, from some of the
prohibited transaction provisions of ERISA and the Code for the purchase,
holding and resale by Plans of securities representing interests in asset-backed
pass-through trusts that consist of receivables, loans and other obligations
that meet the conditions and requirements of the exemption. The obligations
covered by the exemption include obligations that bear interest or are purchased
at a discount and are secured by commercial real property. The exemption may
apply to the acquisition, holding and resale of the certificates by a Plan,
provided that the conditions of the exemption (which are described below) are
met.
Among the conditions that must be satisfied for the exemption to apply are:
(1) The acquisition of the certificates by a Plan is on terms (including
the price for the certificates) that are at least as favorable to the Plan
as they would be in an arm's-length transaction with an unrelated party;
(2) The certificates acquired by the Plan have received a rating at the
time of acquisition in one of the four highest generic rating categories
from Moody's, S&P or Fitch;
(3) The sum of all payments made to, and retained by, Credit Lyonnais
Securities (USA), Inc. in connection with the distribution of the
certificates represents not more than reasonable compensation for placing
the certificates. The sum of all payments made to and retained by us
pursuant to the assignment of the mortgage loan to the issuer represents not
more than the fair market value of the mortgage loan. The sum of all
payments made to and retained by the trustee represents not more than
reasonable compensation for the services provided under the Trust Agreement
and reimbursement of the trustee's reasonable expenses in connection with
the Trust Agreement;
(4) The trustee must not be an affiliate of us, Credit Lyonnais
Securities (USA), Inc., the borrower, or an affiliate of any of them; and
(5) The Plan investing in the certificates is an "Accredited Investor"
as defined in Rule 501(a) of Regulation D under the Securities Act.
The fourth general condition set forth above is satisfied as of the date of
this prospectus. A fiduciary of a Plan contemplating purchasing certificates
must make its own determination that, at the time of purchase, the certificates
continue to satisfy the fourth general condition set forth above. A fiduciary of
a Plan contemplating purchasing any certificate must make its own determination
that the first, second, third and fifth general conditions set forth above will
be satisfied with respect to the certificate as of the date of purchase.
70
P-->

The exemption also requires that the issuer meet the following requirements:
1. the corpus of the trust must consist solely of assets of a type that
have been included in other investment pools;
2. certificates in those other investment pools must have been rated in
one of the four highest rating categories of Moody's, S&P or Fitch for at
least one year prior to the Plan's acquisition of certificates; and
3. certificates evidencing interests in those other investment pools
must have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of certificates.
The exemption may provide only limited relief to Plans sponsored by us,
Credit Lyonnais Securities (USA), Inc., the trustee, the borrower or any
affiliate of any of them and those Plans may not purchase certificates in
reliance on the exemption.
If additional conditions are satisfied, the exemption may provide relief
from some of the prohibited transaction rules of ERISA and the Code for
transactions related to the servicing, management and operation of the issuer.
We expect that these additional conditions will be satisfied.
Section 403 of ERISA requires that all Plan assets be held in trust by the
Plan trustee or a duly authorized fiduciary. However, DOL regulations in 29
C.F.R. Section 2550.403a-1(b)(3) provide that even if the underlying assets of
an entity are deemed to be assets of a Plan that invests in the entity, the
trust requirement of Section 403 of ERISA will be satisfied if the indicia of
ownership of the Plan's interest in the entity are held in trust by the Plan
trustee or fiduciary. The possession by the Plan trustee or fiduciary of the
certificates should satisfy the trust requirement as to the underlying assets of
the issuer.
Any Plan fiduciary considering whether to purchase a certificate on behalf
of a Plan should consult with its counsel regarding the potential consequences
of the investment and the applicability of the fiduciary responsibility and
prohibited transaction provisions of ERISA and the Code to the investment.
Each Plan fiduciary should determine whether, under the general fiduciary
standards of investment prudence and diversification, an investment in a
certificate is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio. Moreover, a fiduciary of a Plan should consult with its counsel with
respect to the applicability of the exemption and should determine whether the
conditions of the exemption have been satisfied, including the fact that the
trust fund consists of only one mortgage loan secured by a single mortgaged
property which is a leasehold interest in one property and that the mortgage
loan is secured by rights under the documents evidencing the mortgage loan. In
particular, a fiduciary of a Plan should consider whether the issuer constitutes
a "trust" for purposes of the exemption. The fiduciary of a Plan, such as a
governmental Plan, not subject to ERISA or Section 4975 of the Code, should make
its own determination as to the need for and the availability of any exemptive
relief under applicable law.
THE SALE OF CERTIFICATES TO A PLAN IS IN NO RESPECT A REPRESENTATION OR WARRANTY BY US OR ANY OTHER PERSON THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL
REQUIREMENTS WITH RESPECT TO INVESTMENTS BY PLANS GENERALLY OR ANY PARTICULAR PLAN, THAT THE EXEMPTION WOULD APPLY TO THE ACQUISITION OF THIS INVESTMENT BY PLANS IN GENERAL OR ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN.
71
P-->

LEGAL INVESTMENT CONSIDERATIONS
The certificates do not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended.
No representation is made as to the proper characterization of the certificates
for legal investment purposes, financial regulatory purposes, or other purposes,
or as to the ability of particular investors to purchase the certificates under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the certificates.
All depository institutions considering an investment in the certificates
should review the "Supervisory Policy Statement on Investment Securities and
End-User Derivatives Activities" dated April 17, 1998 of the Federal Financial
Institutions Examination Council. The Policy Statement, which has been adopted
by the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency, the Office
of Thrift Supervision and the National Credit Union Administration, requires
federally insured depository institutions, as a matter of safety and soundness,
to fully understand and manage the risks inherent in investment activities,
including investments in mortgage related securities. The Policy Statement
describes sound practices for managing risks such as market risk, credit risk,
liquidity risk, operational risk and legal risk. Among other things, the Policy
Statement provides that institutions should perform a pre-purchase analysis that
includes a price sensitivity analysis before investing in complex instruments,
instruments with which they are less familiar and potentially volatile
instruments. Institutions also are expected to have effective internal control
systems, for the organization generally and investment activities in particular.
Senior management and directors are expected to review investment policies,
strategies and limits at least annually. In addition to the Policy Statement,
the various regulatory agencies may issue additional interpretive guidance
relating to investments and derivative instruments for institutions under their
supervision.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by those authorities before purchasing any
certificates, as they may be deemed unsuitable investments, and may otherwise be
restricted, under those rules, policies or guidelines, sometimes irrespective of
the Secondary Mortgage Market Enhancement Act.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not
"interest-bearing" or "incoming-paying," and provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
Accordingly, all institutions whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or review
by regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the certificates constitute legal
investments for them or are subject to investment, capital or other
restrictions.
72
P-->

LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains summaries of legal aspects of mortgage
loans which are general in nature. The following summaries do not purport to
reflect all the laws applicable to the mortgage loan. The summaries are
qualified in their entirety by reference to the applicable federal and New York
laws governing the mortgage loan and the mortgage.
MORTGAGES GENERALLY
A mortgage creates a lien upon the real property encumbered thereby. The
lien is not prior to the lien for real estate taxes and assessments. Priority
between liens depends on their terms and generally on the order of filing with a
county office. There are two parties to a mortgage, the mortgagor, who is the
borrower and property owner, and the mortgagee, who is the lender. Under the
mortgage, the mortgagor delivers to the mortgagee a note or bond and the
mortgage. The mortgagee's authority under a mortgage is governed by applicable
law and the express provisions of the mortgage.
The real property covered by a mortgage is most often the fee estate in land
and improvements. However, a mortgage may encumber other interests in real
property such as a tenant interest in a lease of land or improvements, or both,
and the leasehold estate created by the lease. A mortgage covering an interest
in real property other than the fee estate, such as the Mortgage, requires
special provisions in the instrument creating the interest or in the mortgage to
protect the mortgagee against termination of the interest before the mortgage is
paid.
FORECLOSURE GENERAL. Foreclosure is a legal procedure that allows the lender to recover
its mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the borrower defaults in payment or performance of its obligations
under the note or mortgage, the lender has the right to institute foreclosure
proceedings to sell the real property security at public auction to satisfy the
indebtedness.
FORECLOSURE PROCEDURES. The two primary methods of foreclosing a mortgage
are judicial foreclosure, involving court proceedings, and nonjudicial
foreclosure pursuant to a power of sale granted in the mortgage instrument. A
foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses are raised or counterclaims are interposed. A foreclosure
action sometimes requires several years to complete.
JUDICIAL FORECLOSURE; NONJUDICIAL FORECLOSURE; POWER OF SALE. A judicial
foreclosure proceeding or power of sale procedure in New York is conducted in a
court having jurisdiction over the mortgaged property. A lender initiates either
action by the service of legal pleadings upon (a) all parties having a fee
interest in the mortgaged property, (b) all parties having a subordinate
interest of record in the real property, and (c) all parties in possession of
the property, under leases or otherwise, whose interests are subordinate or
superior to the mortgage.
Delays in completion of either proceeding may occasionally result from
difficulties in locating defendants. When the lender's right to foreclose is
contested, the legal proceedings can be time-consuming. The court generally
issues a judgment of foreclosure and appoints a referee or other officer to
conduct a public sale of the mortgaged property upon successful completion of a
judicial foreclosure proceeding. The proceeds of that public sale are used to
satisfy the judgment. The procedures that govern these public sales vary.
A power of sale allows a nonjudicial public sale to be conducted generally
following: (a) a request from the lender to the trustee to sell the property
upon default by the borrower, and (b) notice of sale is given in accordance with
the terms of applicable New York State law. Generally if a defendant
73
P-->

objects to the use by the lender of a power of sale, the proceeding continues as
a foreclosure proceeding notwithstanding the provisions of the mortgage
instrument providing for the power of sale.
A notice of sale must be posted in a public place and published for a
specified period of time in one or more newspapers. The borrower or a junior
lienholder has only the right to pay off the entire debt to prevent the
foreclosure sale. New York State law governs the procedure for public sale, the
parties entitled to notice, the method of giving notice and the applicable time
periods.
A third party may be unwilling to purchase a mortgaged property at a public
sale because of (a) the difficulty in determining the exact status of title to
the property due to, among other things, third party rights that may exist, and
(b) the possibility that physical deterioration of the property may have
occurred during the foreclosure proceedings.
As a result of the foregoing, it is common for the lender to purchase the
mortgaged property and become the owner thereof. In that case, the lender will
have both the benefits and burdens of ownership, including the obligation to pay
taxes, to obtain casualty insurance and to make repairs necessary to render the
property suitable for sale. The costs of operating and maintaining a commercial
property may be significant and may be greater than the income derived from that
property. The lender also will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale or lease of
the property. Whether the ultimate proceeds of the sale of the property equal
the lender's investment in the property depends upon market conditions.
Moreover, because of the expenses associated with acquiring, owning and selling
a mortgaged property, a lender could realize an overall loss on a mortgage loan
even if the mortgaged property is sold at foreclosure, or resold after it is
acquired through foreclosure, for an amount equal to the full outstanding
principal amount of the loan plus accrued interest.
EQUITABLE AND OTHER LIMITATIONS ON ENFORCEABILITY OF PROVISIONS. New York
State courts have traditionally imposed general equitable principles to limit
the remedies available to lenders in foreclosure actions. These principles are
generally designed to relieve borrowers from the effects of mortgage defaults
perceived as harsh or unfair. Relying on these principles, a court may:
(a) alter the specific terms of a loan to the extent it considers necessary to
prevent or remedy an injustice, undue oppression or overreaching; (b) require
the lender to undertake affirmative actions to determine the cause of the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan; (c) require the lender to reinstate a loan or recast a
payment schedule in order to accommodate a borrower that is suffering from a
temporary financial disability; or (d) limit the right of the lender to
foreclose in the case of a nonmonetary default, such as a failure to adequately
maintain the mortgaged property or an impermissible further encumbrance of the
mortgaged property.
RIGHTS OF REDEMPTION. The purposes of a foreclosure action are (a) to
enable the lender to realize upon its security, and (b) to bar the borrower, and
all persons who have interests in the property that are subordinate to that of
the foreclosing lender, from exercising their "equity of redemption."
The doctrine of equity of redemption provides that, until the property
encumbered by a mortgage has been sold in accordance with a properly conducted
foreclosure and foreclosure sale, those having interests that are subordinate to
that of the foreclosing lender have an equity of redemption and may redeem the
property by paying the entire debt with interest. Those having an equity of
redemption must generally be made parties to the foreclosure proceeding in order
for their equity of redemption to be terminated.
The equity of redemption is a common-law, nonstatutory right which should be
distinguished from post-sale statutory rights of redemption. In New York State,
statutory redemption may occur only upon payment of the foreclosure sale price.
74
P-->

ENVIRONMENTAL RISKS
Real property pledged as security to a lender may be subject to unforeseen
environmental risks. See "Risk Factors--The Mortgage Loan--ENVIRONMENTAL LAW
CONSIDERATIONS." Environmental risks may give rise to, for example, (a) a
diminution in value of the mortgaged property or the inability to foreclose
against the property or (b) in circumstances as more fully described below,
liability for clean-up costs or other remedial actions, and for natural resource
damages, at the property, which liabilities could exceed the value of the
property, the aggregate assets of the owner or operator, or the principal
balance of the related indebtedness.
Under federal law and the laws of the State of New York, failure to perform
environmental remediation required or demanded by the applicable governmental
authority may give rise to a lien on the property to ensure the reimbursement of
remedial costs incurred by the federal or state government. That lien may have
priority over the lien of an existing mortgage against the property. The
mortgaged property could therefore be adversely affected by the existence of
environmental conditions.
Under the federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or "CERCLA," and some state laws, a secured
lender such as the Trust Fund may be liable as an "owner or operator" or
responsible party for costs of addressing releases or threatened releases of
hazardous substances on a mortgaged property if such lender or its agents or
employees have participated in the management of the operations of the borrower,
even though the environmental damage or threat was caused by the borrower, a
prior owner or other third party. Similarly, when a lender forecloses and takes
title to a contaminated facility or property (whether it holds the facility or
property as investment or leases it to a third party) under some circumstances
the lender may incur potential environmental liability.
The Trust Agreement will provide that the trustee, acting on behalf of the
Trust Fund, shall not acquire title to, or possession of, the mortgaged
property, take over its management or operation or take any other action that
might subject the Trust Fund to liability under CERCLA or comparable laws unless
the trustee has previously determined, based upon a Phase I or other specified
environmental assessment prepared by a qualified person who regularly conducts
environmental assessments, that the mortgaged property is in compliance with
applicable environmental laws and that there are no circumstances relating to
use, management, disposal or migration of any hazardous or toxic substances for
which investigation, monitoring, containment, clean-up or remediation could be
required under applicable environmental laws, or that it would be in the best
economic interest of the issuer to act in a manner required under those laws.
This requirement effectively precludes enforcement of the lien of the Mortgage
on the mortgaged property as security for the Mortgage Note until a satisfactory
environmental assessment is obtained or any required remedial action is taken,
reducing the likelihood that the issuer will become liable for any environmental
condition affecting the mortgaged property, but making it more difficult to
realize on the security for the mortgage loan. However, there can be no
assurance that any environmental assessment obtained by the trustee will detect
all possible environmental conditions or the extent or severity of any
environmental conditions or that the other requirements of the Trust Agreement,
even if fully observed by the trustee, will in fact insulate the issuer from
liability for environmental conditions.
If a lender is or becomes liable for clean-up costs, it may bring an action
for contribution against the current owners or operators, the owners or
operators at the time of on-site disposal activity or any other potential
responsible party, but those persons or entities may be bankrupt or otherwise
judgment proof. Furthermore, any action against a borrower may be adversely
affected by the limitations on recourse in the mortgage loan.
75
P-->

LEASES AND RENTS
Commercial mortgage loan transactions often provide for an assignment of the
leases and rents pursuant to which the borrower typically assigns its right,
title and interest as landlord under each lease, and the income derived
therefrom, to the lender while either obtaining a license to collect rents for
so long as there is no default or providing for the direct payment to the
lender.
LAWS AND REGULATIONS
The mortgaged property is subject to compliance with various federal, state
and local statutes and regulations. Failure to comply with those laws could
result in material diminution in the value of the mortgaged property which
could, together with the limited alternative uses for the mortgaged property,
result in a failure to realize the full principal amount of the mortgage loan.
Any failure to comply with those statutes and regulations, however, would likely
result in an event of default by the borrower under the Mortgage, enabling the
trustee to pursue remedies available by law or under the Mortgage.
STATUTORY LIABILITIES
The Code provides priority to some tax liens over the lien of the Mortgage.
In addition, substantive requirements are imposed upon mortgage lenders in
connection with the origination and the servicing of mortgage loans by numerous
federal and some state consumer protection laws. These federal laws impose
specific statutory liabilities upon lenders who originate mortgage loans and who
fail to comply with the provisions of the law. In some cases this liability may
affect assignees of the mortgage loans.
ENFORCEABILITY OF PROVISIONS
The Mortgage contains a due-on-sale clause, which permits the mortgagee to
declare an Event of Default if the borrower transfers or encumbers the mortgaged
property or any interest therein in violation of the restrictions with respect
thereto set forth in the Mortgage. In that event, the mortgagee shall be
entitled to exercise its remedies against the mortgaged property and to
accelerate the entire indebtedness evidenced by the mortgage loan. The ability
of mortgagees and their assignees and transferees to enforce due-on-sale clauses
was addressed by Congress when it enacted the Garn-St Germain Depository
Institutions Act of 1982. The legislation, subject to exceptions, provides for
federal preemption of all state restrictions on the enforceability of
due-on-sale clauses. Although the Garn-St Germain Act provides that due-on-sale
clauses are enforceable, it states that a mortgagee is "encouraged" to permit an
assumption of a loan at the existing interest rate or at some other rate less
than the average of the interest rate and the market rate.
The Mortgage includes a debt-acceleration clause, which permits the
mortgagee to accelerate the full debt upon a monetary or nonmonetary default,
and upon expiration of the applicable cure period, of the borrower. The courts
of all states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices.
However, courts may refuse to allow a mortgagee to foreclose a mortgage when an
acceleration of the indebtedness would be inequitable or unjust or the
circumstances would render the acceleration unconscionable.
Upon foreclosure, courts have applied general equitable principles. These
equitable principles are generally designed to relieve the borrower from the
legal effect of its defaults under the loan documents. Examples of judicial
remedies that have been fashioned include judicial requirements that the lender
undertake affirmative and expensive actions to determine the causes of the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required that lenders reinstate loans or recast
payment schedules in order to accommodate borrowers who are suffering from
temporary financial disability. In other cases, courts have limited the right of
the lender to foreclose if
76
P-->

the default under the mortgage instrument is not monetary, such as the
borrower's failing to maintain adequately the property or the borrower's
executing a second mortgage affecting the property. Finally, some courts have
been faced with the issue of whether or not federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers under deeds of trust or mortgages receive notices in addition to the
statutorily-prescribed minimum. For the most part, these cases have upheld the
notice provisions as being reasonable.
AMERICANS WITH DISABILITIES ACT
Under Title II of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder, commonly known as the "ADA," public entities that
provide public transportation must make key stations in rapid rail and light
rail systems readily accessible to and usable by individuals with disabilities.
In addition, under the ADA, alterations to a place of public accommodation or a
commercial facility are to be made so that, to the maximum extent feasible, the
altered portions are readily accessible to and usable by disabled individuals.
BANKRUPTCY ISSUES
Numerous statutory provisions, including the Federal Bankruptcy Code and
state laws affording relief to debtors, may interfere with and delay the ability
of a secured mortgage lender to obtain payment of a loan, to realize upon
collateral and/or to enforce a deficiency judgment. For example, under the
Bankruptcy Code, virtually all actions, including foreclosure actions and
deficiency judgment proceedings, are automatically stayed upon the filing of a
bankruptcy petition, and, often, no interest or principal payments are made
during the course of the bankruptcy proceeding. The delay and consequences
thereof caused by the automatic stay can be significant. Also, under the
Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a
junior lienholder may stay the senior lender from taking action to foreclose out
the junior lien. Upon filing of a petition in bankruptcy by the borrower, the
automatic stay provision of the Bankruptcy Code would also apply to the reserve
account of the borrower. See "Description of the Mortgage Loan--General."
The Bankruptcy Code may affect the ability to enforce rights under the
Mortgage in the event that the borrower becomes the subject of a bankruptcy or
reorganization proceeding under the Bankruptcy Code. Section 362 of the
Bankruptcy Code operates as an automatic stay of, among other things, any act to
obtain possession of property of or from a debtor's estate, which may delay the
mortgagee's exercise of these remedies in the event that the borrower becomes
the subject of a proceeding under the Bankruptcy Code.
Under the Bankruptcy Code, the amount and terms of a mortgage secured by
property of a debtor may sometimes be modified. The amount of the loan secured
by the real property may be reduced to the then current value of the property
pursuant to a confirmed plan of reorganization or lien avoidance proceeding,
thus leaving the lender a secured creditor to the extent of the then current
value of the property and a general unsecured creditor for the difference
between that value and the outstanding balance of the loan. Other modifications
may include the reduction in the amount of each semi-annual payment due under
the loan, which reduction may result from a reduction in the rate of interest
and/or the alteration of the repayment schedule, with or without affecting the
unpaid principal balance of the loan, and/or an extension or acceleration of the
final maturity date. Some courts with federal bankruptcy jurisdiction have
approved plans, based on the particular facts of the reorganization case, that
effected the curing of a mortgage loan default by paying arrearages over a
number of years. Also, under the Bankruptcy Code, a bankruptcy court may permit
a debtor through its plan of reorganization to decelerate a secured loan and to
reinstate the loan even though the lender accelerated the mortgage loan and
final judgment of foreclosure had been entered in state court; provided no sale
of the property had yet occurred, prior to the filing of the debtor's petition.
This may be done even if the full amount due under the original loan is never
repaid. Other types of significant modifications to the
77
P-->

terms of the mortgage may be acceptable to the bankruptcy court, such as the
substitution of collateral which is the "indubitable equivalent" of the real
property subject to the mortgage, often depending on the particular facts and
circumstances of the specific case.
Federal bankruptcy law may also interfere with or affect the ability of a
secured mortgage lender to enforce an assignment by a borrower of rents and
leases related to a mortgaged property if the borrower is in a bankruptcy
proceeding. Under Section 362 of the Bankruptcy Code, a mortgagee may be stayed
from enforcing the assignment, and the legal proceedings necessary to resolve
the issue can be time-consuming and may result in significant delays in the
receipt of the rents. Rents and leases may also escape an assignment thereof
(a) if the assignment is not fully perfected under state law prior to
commencement of the bankruptcy proceeding, (b) to the extent the rents and
leases are used by the borrower to maintain the mortgaged property, or for other
court authorized expenses, or (c) to the extent other collateral may be
substituted for the rents and leases.
The Bankruptcy Code provides that a lender's perfected pre-petition security
interest in leases and rents continues in the post-petition leases and rents,
unless a bankruptcy court orders to the contrary "based on the equities of the
case." Thus, unless a court orders otherwise, revenues from the mortgaged
property generated after the date the bankruptcy petition is filed will
constitute "cash collateral" under the Bankruptcy Code. Debtors may only use
cash collateral upon obtaining the lender's consent or a prior court order
finding that the lender's interest in the mortgaged property and the cash
collateral is "adequately protected" as that term is defined and interpreted
under the Bankruptcy Code.
In a bankruptcy or similar proceeding involving the borrower, action may be
taken seeking the recovery as a preferential transfer of any payments made by
the borrower under the mortgage loan. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business or
if the value of any collateral pledged to the payee exceeded the amount of the
entire debt. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
Special provisions in the Bankruptcy Code applying to railroad
reorganizations seek to protect the public interest in continued rail service.
Although the Bankruptcy Code requires that the trustee and the bankruptcy court
consider the public interest in addition to the interests of the debtor
railroad, creditors and stockholders, court decisions hold that rights of
secured creditors should not generally be affected by this mandate. However, a
railroad may be liquidated if a court determines, among other things, that
liquidation is in the public interest, and it must be liquidated if a plan of
reorganization is not confirmed within five years after the bankruptcy filing.
If liquidation does occur under the Bankruptcy Code, there is no assurance that
the proceeds of the liquidation would be sufficient to pay the
certificateholders, in whole or in part.
78
P-->

PLAN OF DISTRIBUTION
The certificates that the selling holders are offering are being registered
by us pursuant to the exercise by these holders of registration rights under a
Registration Rights Agreement, dated as of June 20, 2001, by and between us and
the trustee.
The selling holders are selling the certificates for their own accounts, and
we will not receive any proceeds from the sale of the certificates offered by
the selling holders.
We are registering all $300,000,000 of certificates on behalf of the selling
holders. As used in this prospectus, the term "selling holders" includes donees
and pledgees selling certificates received from the named selling holders after
the date of this prospectus. We will pay the registration and other fees
incurred in connection with the registration of the certificates.
The selling holders may sell the certificates from time to time in one or
more types of transactions which may include block transactions on any national
securities exchange or quotation service on which they may be listed or quoted
at the time of sale, in the over-the-counter market, in transactions otherwise
than on these exchanges or systems or in the over-the-counter market, in
negotiated transactions, through put or call options transactions relating to
the certificates through short sales of, or through a combination of these
methods of sale, at fixed prices, at market prices prevailing at the time of
sale, at varying prices determined at the time of sale or negotiated prices.
These transactions may or may not involve brokers or dealers.
A selling holder may enter into hedging transactions with broker-dealers,
and the broker-dealers may engage in short sales of the certificates in the
course of hedging the positions they assume with the selling shareholder,
including in connection with distribution of the certificates by broker-dealers.
In addition, a selling holder may, form time to time, sell short the
certificates, and in these instances, this prospectus may be delivered in
connection with short sales and the certificates offered may be used to cover
short sales. A selling holder may also enter into option or other transactions
with broker-dealers that involve the delivery of the certificates to the
broker-dealers, who may then resell or otherwise transfer the certificates.
The selling holders and any broker-dealers that act in connection with the
sale of the certificates might be deemed to be "underwriters" within the meaning
of Section 2(a)(11) of the Securities Act, and any commissions received by these
broker-dealers and any profit on the resale of the certificates sold by them
while acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act. Because the selling holders may be deemed
to be "underwriters" within the meaning of Section 2(a)(11) of the Securities
Act, the selling holders will be subject to the prospectus delivery requirements
of the Securities Act. We have informed the selling holders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
We have agreed to indemnify the selling holders against liabilities arising
under the Securities Act, the Exchange Act or otherwise as a result of any
untrue statement of material fact or omission to state a material fact in this
registration statement or the related prospectus. Each selling holder may agree
to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the certificates for that holder against similar
liabilities, or other liabilities as they may agree, including liabilities
arising under the Securities Act.
Each selling holder may also resell all or a portion of its certificates in
open market transactions in reliance upon Rule 144 under the Securities Act, if
it meets the criteria and conforms to the requirements of Rule 144, and it may
sell its certificates in offshore transactions if it meets the criteria and
conforms to the requirements of Regulation S under the Securities Act.
79
P-->

INCORPORATION OF INFORMATION BY REFERENCE
The Securities and Exchange Commission allows us to incorporate by reference
information that we file with the Commission, which allows us to disclose
important information to you by referring you to those documents. Any
information incorporated by reference is considered to be part of this
prospectus. Before the effectiveness of our Registration Statement on Form S-3
which contains this prospectus, we were not required to file any information
with the Commission. Following the effectiveness of the Registration Statement,
we will file quarterly reports and other information with the Commission.
Information that we file later with the Commission will automatically update the
information in this prospectus. In all cases, you should rely on the later
information over different information included in this prospectus. As a
recipient of this prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents, unless the exhibits
are specifically incorporated by reference, at no cost, by writing or calling:
Andrew Stidd, 400 West Main Street, Suite 338, Babylon, NY11702, telephone:
(631) 587-4700.
LEGAL MATTERS
The validity of the securities will be passed on for us by Latham & Watkins,
New York, New York.
80
P-->

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[LOGO]A/P I DEPOSIT CORPORATION AMTRAK/PENNSYLVANIA STATION LEASE FINANCE TRUST 2001LEASE-BACKED COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2001
---------------------
PROSPECTUS
---------------------
UNTIL , 200 , ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THE UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
, 2002
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
P-->

PART II INFORMATION NOT REQUIRED IN THE PROSPECTUSITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth various expenses which are anticipated to be
incurred in connection with this offering:
[Download Table]
SEC registration fee........................................ $71,700
Blue sky fees and expenses.................................. *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Miscellaneous............................................... *
-------
Total................................................... $ *
=======
------------------------
* To be determined and filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation has the power to indemnify any current or
former director, officer, employee or agent of the corporation, who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
against the expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
the defense of any action by reason of being or having been a director, officer,
employee or agent of the corporation, or being or having been serving at the
request of the corporation as a director, officer, employee or agent of another
enterprise, if such person shall have acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
that such person had no reasonable cause to believe his conduct was unlawful,
except that, if such action shall be in the right of the corporation, no such
indemnification shall be provided as to any claim, issue or matter as to which
such person shall have been judged to have been liable to the corporation unless
and only to the extent that the Court of Chancery of the State of Delaware (the
"Court of Chancery"), or any court in such suit or action was brought, shall
determine upon application that, despite the liability judgment, but in view of
all of the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the Court of Chancery or such other
court shall deem proper. Article VII of the by-laws of the Depositor provide
this indemnification.
In addition, the by-laws also provide that the Depositor may reimburse
expenses incurred in defending or investigating a threatened or pending action,
suit or proceeding in advance of the final disposition of the proceeding,
provided that the person receiving payment undertakes to repay the Depositor
unless the person is ultimately determined to be entitled to indemnification.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for payments of unlawful
dividends or unlawful stock repurchases or redemptions, or (iv) for any
transaction from which
II-1
P-->

the director derived an improper personal benefit. Article Eighth of the
Depositor's certificate of incorporation provides for such limitation of
liability.
The indemnification provided by Article Eighth of the Depositor's
certificate of incorporation and Article VII of its by-laws is not exclusive of
any other indemnification rights to which those seeking indemnification may be
entitled under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in such person's other capacity while holding such office.
ITEM 16. EXHIBITS.
[Download Table]
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
--------------------- ------------------------------------------------------------
3.1Certificate of Incorporation, filed on June 14, 2001 of A/P
I Deposit Corporation.
3.2By-Laws of A/P I Deposit Corporation.
4.1 Specimen Certificate of Lease-Backed Commercial Mortgage
Pass-Through Certificates, Series 2001.
4.2 Specimen Certificate of the registered Lease-Backed
Commercial Mortgage Pass-Through Certificates, Series 2001.
4.3 Registration Rights Agreement between A/PI Deposit
Corporation and Credit Lyonnais Securities (USA) Inc., dated
as of June 20, 2001.
5.1* Opinion of Latham & Watkins.
10.1 Trust Agreement, dated as of June 20, 2001, between A/PI
Deposit Corporation and Wells Fargo Bank Northeast, N.A., as
trustee.
10.2 Loan and Security Agreement, dated as of June 20, 1001,
between A/P I Deposit Corporation and Penn Station Leasing,
LLC. 10.3 Lease, dated as of June 20, 2001, between National Railroad
Passenger Corporation and Penn Station Leasing, LLC.
10.4 Facility Sublease, dated as of June 20, 2001, between
National Railroad Passenger Corporation and Penn Station
Leasing, LLC.
21.1Subsidiaries of A/P I Deposit Corporation.
23.1* Consent of Latham & Watkins (included in their opinion filed
herewith as exhibit 5.1).
24.1Power of Attorney.
------------------------
* To be filed by amendment.
SCHEDULES OMITTED: Schedules not listed above are omitted because of the
absence of the conditions under which they are required or because the
information required by the omitted schedules is set forth in the financial
statements or the notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission this indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against those liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
II-2
P-->

person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Act and will
be governed by final adjudication of the issue.
The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement: (1) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933; (2) to reflect in the prospectus
any facts or events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of a prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and (3) to include any material information
with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to that information in the
registration statement.
The undersigned registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
P-->